Good Credit Score – Way to Secure Financial Future

There are three basic necessity of human being. Food, Shelter, and Clothing. Now all of these do not come automatically. One has to earn, and save and crack the best deal. Food and clothing is still not as expensive as the shelter is! So one does not have to consider that cost to a huge level! But Shelter… Most expensive of all the basic needs. In earlier times, people have spent the whole life saving for the money and buying a home. But nowadays it has become easy. The easier is because one can take a loan. So the dream can be achieved a decade or two decades earlier than seen!

Nimesh Wanted to take HDFC Home Loan and shift to a two bedroom house with his wife and twin kids. He had a house in his native where his parents stayed. He was an urban responsible husband and a father who wanted to stay in the city, work and provide education to his kids. Nimesh was always a responsible payer. Taxes, electricity bills, credit card bills, maintenance, nothing was ever delayed even for a day. Even when he started to pay off his education loan he had taken for his MBA, he paid all in time! And because he was a responsible payer, he got many privileges!

The first one was a good Credit Score! This is by default. Many people take the stress of maintaining a good credit score. But if the payment of all the credits have always been made on time and the report is checked regularly, the score will never be on toss! Also, with the credit score, the banks and the NBFCs check the generosity of the party applying. Past payments, why the loan is required, if the applicant will be able to repay the loan etc. And Nimesh was lucky for all of these points and the loan approval didn’t take him to many banks and multiple application but happened in one go and that too at earliest.

Now one may think that what is the correlation of good credit score and financial security. Well, for the example mentioned above, the financial future does not necessarily mean the savings or the investment in equity or mutual funds or bonds or insurance which an individual makes. But, it about how efficiently the funds are distributed! A good score is the reflection of the responsible payer of the debts. One may want to invest in multiple asset class and for that, they may want the funds from the banks and they would not want to either a. Liquidize the funds they have. b. they do not have enough funds currently. In any of the case when the applicant tries to ask the credit from a bank, the first work bank is going to do is ask for the check for the credit score! May it be a home loan like HDFC home loan or personal loan or business loan what one wants to apply for in order to make an investment which is going to lead them to a better secured financial future, score is very important as the approval of the credits is based on the score when applied for in banks or the NBFCs.

In the end, let’s get a brief of the score. It is made up of five parameters. Payment History, Amount Owed, Credit Mix, New Credits and Length of credit history. Various credit bureaus have different algorithms to calculate the score and they provide a score and report to each individual depending on those factors and it’s calculation. As explained earlier that if taken care from the initial stage, a good credit score which is 750+ to 900 is no big deal to be achieved.

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