5 reasons to work towards building a strong credit score

financialexpress.com:

Credit bureaus assess credit scores by examining how you manage your credit card and loan payments, as reported by lenders and credit card companies. In the absence of adequate information regarding your credit history, credit bureaus are unable to generate a credit score for you.

Here are five reasons why you must work towards having a good credit score:

Lenders access credit reports of the loan applicants to evaluate their creditworthiness. Those having a good credit score, i.e. scores of 750 and above, are considered to be financially disciplined and thus, carry a lower credit risk for the lenders. Hence, applicants having higher credit scores have better chances of getting their loan application approved, vis-à-vis those having a relatively-lower credit score.

Also Read: Short Term Fixed Deposits offering highest interest rates – Compare the FD rates of 15 banks

As a part of risk-based pricing strategy, many lenders have started factoring in the credit scores of loan applicants while setting the interest rate. They try to attract applicants with higher credit scores by offering loans at preferential interest rates. On the contrary, lenders try to compensate for higher credit risk involved in lending to those with lower credit scores by levying a higher interest rate.

As the risk-based pricing strategy can differ widely across lenders, loan applicants should compare the interest rates offered by as many lenders as possible before making the final choice. The best way to do so is to visit online financial marketplaces and compare loan offers from multiple lenders based on one’s credit score, job profile, monthly income, etc.

Just as in the case of interest rate, some lenders have started rewarding loan applicants