A credit score plays a crucial role in establishing a person’s creditworthiness in the market. Most financial institutions have a minimum credit score criteria to grant loans to borrowers. A high credit score can help quickly establish one’s creditworthiness as a borrower. Credit card companies also have a strict policy regarding credit scores. The credit limit is also set based on the credit score to a fair extent. It is like a litmus test to demonstrate the borrowing capacity. Read on to learn more about credit scores and how it helps get the desired
Understanding credit scores
A credit score can be explained as a numeric summary of an individual’s credit history to learn about their creditworthiness. Numbers can speak louder than words, especially when talking about creditworthiness. Learning about the credit profile of the borrower requires multiple considerations. It can be confusing at times to understand how creditworthy an individual is. However, with a number assigned to borrowers based on their overall credit profile, it is easier to analyse the creditworthiness.
Authorised credit bureaus calculate the credit score in the country. It is a 3-digit number that varies between 300 to 900, depending on the credit profile and history of the person. A higher number represents a better score and is associated with high creditworthiness. Therefore, it can help you get a higher loan amount and better loan terms. Generally, a score over 700 points is considered good in most scenarios. However, to avail of a more significant loan amount, keeping the credit score over 750 points is recommended.
Relevance of credit scores while travelling
Different credit bureaus of a country calculate the credit score. These bureaus consider multiple factors before giving a particular credit score to a person. As a result, different credit bureaus can provide varied credit scores. However, there won’t be a staggering difference but only a slight deviation based on the exact calculation process. Since different nations have different credit bureaus, they might deploy their calculation method. A good credit score from any bureau will put you in the good books of any lender.
You can save a lot of money while travelling with a good credit score. A good credit score will help you get the right travel credit card which can provide you with an array of discounts and deals to save money. Most travel credit cards offer users discounts on flight tickets, hotel bookings, restaurants, etc. It can help you save a significant sum of money. Some credit cards also offer additional bonuses like free lounge access, miles points, etc.
Best practices for using a credit card overseas
Here are some best practices to follow if you want to use your credit card for travelling overseas.
1. Use credit cards without foreign transactions fees
Foreign transaction charges can significantly increase the overall expenses on your credit card. If you are planning to use a credit card for paying foreign merchants, check the agreement with the card issuer to find out about foreign transaction fees. In most cases, it is in the range of 1 to 3 per cent. You should opt for a credit card with zero transaction fees to cut unnecessary expenses. If you don’t own a card like that, apply for a new one before travelling. A good credit score will easily help you get one.
2. Get in touch with your card issuer
Before commencing your international trip, it is highly recommended to contact your credit card issuer and inform them about the same. This will help to avoid the suspension of credit cards on account of suspicious activity. Most credit card providers block these transactions to safeguard their customer’s interests. You should also ask for a contact number to assist with your foreign transactions. Many credit card issuers have designed international credit cards to accommodate foreign travel-related expenses. You can easily apply for one to avoid these hassles.
3. Don’t go for dynamic currency conversion
The dynamic currency conversion feature offered by credit cards allows users to shop at foreign outlets by paying in their domestic currencies. Unfortunately, some foreign merchants can misuse this feature by setting a higher exchange rate. Therefore, you must avoid opting for dynamic currency conversion while purchasing goods outside the domestic country.
4. Keep an eye on the reward program changes
Keeping a tab over the reward program changes can help you optimise your cost. Most travel credit cards offer an extensive list of rewards and bonuses to credit card users. You can keep a check on your credit card statements to learn about these changes. If they are not in your favour, you can always contact customer support and notify them about the discrepancies.
A high credit score has plenty of perks that you can benefit from. For example, getting a travel credit card with high reward points and other perks is easier with a good credit score.