{"id":157,"date":"2021-05-21T13:28:01","date_gmt":"2021-05-21T07:58:01","guid":{"rendered":"https:\/\/www.loansettlement.com\/blog\/?p=157"},"modified":"2022-04-07T17:08:54","modified_gmt":"2022-04-07T11:38:54","slug":"credit-score-how-it-makes-your-credit-soar-or-sore","status":"publish","type":"post","link":"https:\/\/www.loansettlement.com\/blog\/credit-score-how-it-makes-your-credit-soar-or-sore\/","title":{"rendered":"Credit Score – How It Makes Your Credit Soar Or Sore"},"content":{"rendered":"

Credit score is a numerical value about an individual\u2019s creditworthiness. This score helps lenders decide how likely a person will repay his\/her loans in time. It plays a major role in determining a person\u2019s eligibility for financial assistance in the form of loans. Therefore it is very important to pay one\u2019s bills on time. Deferred payments are explicitly discouraged.<\/p>\n

Here are some of the reasons why a person\u2019s credit score is very important!<\/p>\n

Credit score determines one\u2019s creditworthiness <\/strong><\/p>\n

Credit score is used as a quick and highly reliable source by banks and financial institutions to judge an individual\u2019s credit management record. A strong credit score would mean that the lender might be willing to approve a loan with favorable terms and conditions at lower rates of interest. A good score would give them a sense of assurance about the reliability of an individual. Simply put, a person\u2019s credit score mirrors their payment habits.<\/p>\n

Later the payment, lower the score <\/strong><\/p>\n

It has been found that a late payment of 30 days could drop the score up to 100 points. The same finding showed that a late payment of 90 days could damage the credit score for up to 7 years and deferring the payment for more than 120 days could \u201ccharge off\u201d a person\u2019s debt to a third party and this is further shown in the credit report. It also depends on the type of loan- in case of credit cards the damage may not be as much but if it is a monthly EMI, then the damage could last up to 2 years.<\/p>\n

Law of credit score<\/strong><\/p>\n

Credit score and interest rates have an inverse relationship. Higher the credit score, higher the possibilities of the individual’s loans getting approved at lower interest rates. Lower credit score warrants a high interest rate with lower possibilities of the loan approval<\/p>\n

A series of late payments is most inadvisable<\/strong><\/p>\n

One late payment, though inadvisable, can be compensated by diligent and prompt payment in the future. But that would not work if a person is a serial defaulter. A continuance of non-payment of loans can damage the credit report to an significant extent. It would be what one calls \u201cdigging your own grave\u201d.<\/p>\n

Credit score is a person\u2019s reputation<\/strong><\/p>\n

The first thing banks do when a person applies for a loan is conduct background checks with credit information companies. They can know a person\u2019s credit activities along with his\/her reputation and reliability to pay back their dues. Hence a good credit score speaks volumes about one\u2019s financial discipline.<\/p>\n

Deferred payments and low creditworthiness are not just concerns for the customer but also the lender who relies highly on the credit score and report before approving any loan.<\/p>\n

With all that said, here are some ways to maintain or improve your credit score:<\/p>\n