Credit score fixation: Why are we so obsessed with the three-digit number?

Credit score: When raising a loan from a bank, non-banking financial company or fintech app, borrowers need to show lenders that their creditworthiness is robust. Creditworthiness is measured by a three-digit number, which is also known as the credit score.

A person's credit score is crucial as it reflects their financial activities and behaviour. These include personal loans, car loans, home loans, credit cards, payment of credit card bills, skipping payments, maxing out a card, and others.

Before understanding the significance of a healthy credit score, let us take a look at its key advantages:

I. Loans on convenient terms: When your credit score is high, you can easily obtain a loan on convenient terms, such as a low processing fee and lower documentation.

II. Interest rate: A high credit score helps you get a loan at a lower interest rate, regardless of your income.

III. High credit limit: Additionally, if you have a high credit score, you may be given a higher credit limit on your card. In other words, a high credit limit is an outcome of high creditworthiness.

Given all these advantages, it is not unusual to get obsessed with your score. These are some of the reasons for getting obsessed with the three-digit figure.

Credit score obsession

A. Status symbol of sorts

Credit scores have become a modern status symbol. Flexing a 770-plus credit score is similar to bragging about a high salary. Social comparison theory says that we often evaluate ourselves against peers, and credit scores provide a yardstick.

B. Fear of rejection

Psychologically, we dislike being rejected. Being denied a loan or a card due to a low credit score can feel like a personal rejection, not merely a financial one. This leads to the obsession.

C. Financial Identity

People often connect their credit score with their financial character. It is more than just a number. It gives a judgment on whether the customer is good or not with money.

Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

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