World Health Day is celebrated to drive awareness around good health and wellbeing. But it is also a great time to look at one’s financial health. Indeed, financial planning has become highly imperative, especially after the Covid-19 outbreak. In today’s evolving times, it is essential to stay prepared financially to tackle any sort of uncertainties and ensure a secure future. To achieve this goal, building and maintaining a good credit score is the first and foremost thing one should work on.
The credit score—a three-digit number—is directly connected with one’s financial health and impacts long-term financial goals. It typically ranges from 300 to 900, and a score of 750 or above is considered ideal. When a person applies for a loan or a credit card, the lender would first analyse and assess the consumer’s creditworthiness, which reflects his or her ability to repay the borrowed sum within the given time limit.
One must monitor his or her credit report at regular intervals, just the way we do for our personal health. While tracking the credit reports frequently, one can also identify clerical errors, if any. For instance, someone else’s account details are reflected or your credit report may have incorrect information. By monitoring the credit reports regularly, one can notice such errors. This will not only enable the consumer to take the right financial decisions, but it will also increase his or her awareness around managing personal finances.
Insurance companies also consider credit score to take a call on the premium for an insurance policy. A good credit score helps insurance companies in underwriting processes and risk assessments, before giving a policy to any consumer. The higher the credit score is, the easier it is for any policy holder to get an insurance policy as per his requirements. Insurance aggregators use the credit-based insurance score, which is a key factor in the underwriting process.
Additionally, users who have a good credit score also get beneficial add-on features with fewer terms on their insurance policies. It is highly significant to be aware of the importance of credit history to get the best-suited insurance policy for oneself.
Consumers should be aware of some basic information related to credit score like credit exposure, credit inquiries, payment history, record of managing debt accounts like credit cards, and others.
With high financial literacy, one can get to know about the focus areas and build a strong credit profile that would help in a financial emergency. An individual with a high credit score can enjoy several benefits, including availing loans at lower interest rates, getting a higher credit card limit and lower insurance rates.
Needless to say, maintaining a strong credit profile is a crucial factor that contributes to a person’s holistic financial health and plays a vital role in all the lending decisions. Therefore, one needs to constantly improve the credit score over time to be future ready.
The author is co-founder of RenewBuy.
(Disclaimer: Views expressed are the authors’ own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
