Five Surprising Side Effects of Good Credit

Have You checked your Credit Rating lately?

by Shelly Verma, Contributing writer

Having an honorable financial record in society is very important . One of the ways you can achieve it is by maintaining a good credit score rating.  Good credit is needed for important decisions regarding finance or partnership in the business world. A reputation of sincerity and regularity in financial deals will enable you to win people’s trust, and they will want to continue associations with you as an individual or as a business owner.

Good credit refers to your financial worthiness. It indicates the likelihood that you will clear your debts. It indicates your sense of responsibility, your financial capacity, your attitude towards your work and commitments, and the potential you have to live up to them.

Your credit score becomes an essential figure when you approach banks or financiers for your home or business loans. It is also an important factor when you plan to buy an insurance policy for you and your family. People with high credit scores are at an advantage when it comes to legal or official matters.

How does your good credit help you?

1. Loan acquisition from banks: Whether you’re running a business or working for a business, you’re going to need capital to meet requirements.  Past records and current financial condition of a loan applicant are the major areas of assessment before a bank or a financier approves a loan. Your financial history is thoroughly examined to determine the risk of granting you a loan amount. If your credit scores are high, you are likely to get better interest rates on mortgages or other loans.

2. Buying or renting a home: Buying a home requires capital, and you’re going to get that amount from banks or money lenders. Banks and financiers have a system to evaluate the credit ratings of a person who approaches them. You’re good or bad credit will determine the risk involved in approving your loan. Higher credit ratings make the process easier. Additionally, you can enjoy lower interest rates and higher credit amounts.

Landlords are also concerned about the creditworthiness of the person who may rent their house. The lease period and deposit are calculated according to your credit. Landlords need to be assured that you will pay them duly as per the agreement.

3. Insurance policies: You need to insure your home or your vehicles. Health insurance is another important investment. Your credit history plays an important role in deciding the monthly premium. Insurance companies determine features of the policy they create for clients based on their financial records. If you have a good credit, you may get insurance at lower interest rates. On the other hand, a company may even deny insurance to people who have a bad credit record.

4. Credit cards: Most business owners and consumers are now using credit cards for transactions. It’s easier to get a credit card with a clear credit history. Credit card companies will not be interested in providing facilities to people who have been consistently irregular in payments. Customers are more comfortable using credit cards whether it’s to buy a small burger or a designer outfit from a store; credit cards are always preferred for transactions. Small business owners can use this to their advantage. They can offer more attractive deals to customers and thereby improve their business. This becomes easier for small business owners who themselves have good credit.
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5. Services and facilities: The impact of good credit goes beyond loans and interest rates. In today’s competitive market where manufacturers and sales outlets are looking for long term clients while also attracting new customers, people with good credit hold an advantage. Reliable customers or buyers have a benefit over customers who have bad credit. For example, a cell phone company may demand a security deposit before activating your connection if your credit history is not sound.

Your creditworthiness will be determined by your pattern of paying or not paying bills, and loan amounts. Maintaining good credit is just a matter of financial planning and prioritizing expenses to suit your budget. Putting thought into your financial and future plans will allow you to manage your bills and thus enjoy the benefits of good credit scores.

Shelly Verma is an avid business writer touching on topics from higher education, career improvement, self-help and home improvement.

ARB Team
Arbitrage Magazine
Business News with BITE.

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