Credit scores are important but can they impact the quality of your life? Does a good score guarantee a good life? Well the answer would this depend on what one considers a good life. If we focus on the material and financial aspect, then yes a good score helps one in making one’s life better, allows access to funds which can make one live a more comfortable life or fulfill their aspirations. So in some ways a good score could pave a path to a more fulfilling and better lifestyle.
Let us consider few examples to make our point clear:
Mrs. Shobha wanted to start her own business for which she applied for a loan; it was rejected by the bank as she did not have a good credit score. She had no loans in her name and she had a credit card which she stopped using a few years back but failed to surrender it. There were some charges on it which kept on mounting, thus impacting her negligent credit trail negatively.
Abhay applied for a home loan as they wanted to buy a bigger house close to his office and his son’s school. The loan was denied because he had defaulted on his car loan payment in the past.
So depending on the situation you may have to fore go a dream or suffer minor discomfort every day because of a low CIBIL Score.
A good credit score can result in tangible benefits as illustrated by the above examples. If you need a business loan like Mrs. Shobha needed, so that you can be financially independent or alleviate your financial status; you will have to approach a bank to get the loan sanctioned. Apart from looking at the eligibility criteria the lender will also seek your credit report. If the score is low, the bank tends to consider the applicant as a high risk candidate and may refuse the loan outright.
In certain cases if the score is not too low then the bank may ask the applicant for collateral against which the loan may be sanctioned. All applicants may not have an asset that the can or are willing to pledge as collateral. Pledging an asset as collateral does compromise your safety and financial security.
The applicant’s CIBIL Rating will also have a bearing upon the interest rate at which the loan is sanctioned and other fees also that needs to be paid for a loan application to be sanctioned. A good credit rating can help you get lower interest rates on loans as interest is directly related to the risk of default a lender takes when extending a loan. A good score means lower risk perception and hence a loan available at lower rates. In certain instances lenders may be willing to waive of processing fee also if the applicant has a good credit score.
Though a recent trend, the practice of making a credit history check as part of the background check for applicants is catching up in India. Earlier it was restricted to higher levels of management; however last year a SBI advertisement that clearly stated that people with low credit scores needn’t apply for the bank PO exams showed that credit ratings could impact your employability at all levels. A good stable job definitely is the path to comfortable life and one should not jeopardize their job prospects due to a poor rating.
If you have a low rating, then do not despair as it is not something that cannot be repaired or improved. Depending on the reason/s you could work on your credit score and improve it. If the score is low due to an error then improving it would be easier and faster. Getting the error rectified will immediately boost the score. However if it is low due to missed payments, over use of credit cards, too much debt or a settled account in the past then it could take some time and patience.
However the key to improve the score is identifying the real cause of the problem and the looking for a realistic yet effective way to overcome it. While trying to work on improving your rating stay regular in your payments and do not try and acquire any new cards or loans. Having a good score is an indicator of good financial health and it does make one’s life easier and better.