World Health Day is celebrated to raise awareness of good health and well-being. But it’s also the perfect time to examine your financial health. Indeed, financial planning has become very imperative, especially after the Covid-19 outbreak. In today’s changing times, staying financially prepared is key to weathering all sorts of uncertainties and ensuring a secure future. To achieve this goal, establishing and maintaining a good credit rating is the first thing to work on.
Credit score, a three-digit number, is directly linked to financial health and impacts long-term financial goals. It usually ranges from 300 to 900, and a score of 750 or higher is considered ideal. When a person applies for a loan or a credit card, the lender first analyzes and assesses the creditworthiness of the consumer, which reflects his ability to repay the amount borrowed within the given time.
Keep track of the credit report
You should monitor your credit report on a regular basis, just as we do our personal health. While frequently following credit reports, one can also identify clerical errors, if any. For example, someone else’s account details are mirrored or your credit report may contain incorrect information. By regularly monitoring credit reports, one can notice such errors. This will not only enable the consumer to make the right financial decisions, but it will also increase their awareness of managing their personal finances.
The role of credit score in insurance
Insurance companies also consider credit score when taking a call on the premium for an insurance policy. A good credit rating helps insurance companies with underwriting processes and risk assessments before issuing a policy to a consumer. The higher the credit score, the easier it is for any insured to obtain an insurance policy according to their needs. Insurance aggregators use the credit-based insurance score, which is a key factor in the underwriting process.
In addition, users who have a good credit rating also benefit from beneficial add-on features with fewer conditions on their insurance policies. It is very important to be aware of the importance of credit history to get the best suitable insurance policy for oneself.
Know your credit score
Consumers should be aware of some basic information related to credit score, such as credit exposure, credit applications, payment history, history of managing debt accounts such as credit cards credit, etc
With high financial literacy, one can become familiar with the focus areas and establish a strong credit profile that would help in times of financial emergency. A person with a high credit score can enjoy several benefits, including getting 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 overall financial health and plays a vital role in all loan decisions. Therefore, one must constantly improve the credit rating over time to be prepared for the future.
The author is co-founder of RenewBuy.
For more stories on World Health Day, go here.
(Disclaimer: The opinions expressed are those of the authors and Outlook Money does not necessarily endorse them. Outlook Money will not be liable for damages caused to any person/organization directly or indirectly.)