​Major Mistakes That May Lower Your Credit Score

lower your credit score

Many of you have been using several credit products, repaying your dues, paying your EMIs, etc. Even while you think that all your credit options are being managed well, there are specific mistakes or certain lack of awareness that negatively affect your credit score. Forming a strong credit score is an extremely time-consuming procedure. Thus, it is recommended to avoid any mistakes and stay cautious while opting for a lending product. Note that for all lending institutions may, whether it be Axis Bank or Bajaj Finance, the CIBIL score for them is an important parameter to consider. Thus, ensure to continuously check CIBIL score periodically to know where you stand. 

Read on here a few of the serious mistakes that you must avoid at all costs, as committing them may reduce your credit score substantially. 

Mistake no. 1 – Missed or delayed credit card or loan repayments

Delayed or missed loan repayments or EMIs on credit cards may have a negative impact on your score as all the credit bureaus ensure to take a thorough note of your credit repayment history while computing your score. Usually, 1 or​ around 2 missed payments may impact your credit score. Also, note if you constantly miss or delay your loan repayment, then also you may witness a considerable fall in your score. 

Mistake no. 2 – Maintaining a high CUR (credit utilization ratio)

Your spending pattern even affects your credit profile and score. A lot of dependability on your credit makes you an extremely vulnerable customer. Most lenders hold the impression that you, with a high CUR (credit utilization ratio), may find it difficult to repay the borrowed funds. The only way out here is to use multiple credit cards, as it may balance out your expense burden through a single credit card and may keep your CUR lower at the 30 per cent mark. 

Mistake no. 3 – Submitting multiple loan applications in a short time span

Multiple loan application appears on your credit report, which the lender even knows when they access your credit report to assess your loan or credit card eligibility criteria. This practice not just discourages lenders from lending to you but also lowers your credit score further, making it more difficult for you to borrow any credit option in times of need. 

Mistake no. 4 – Closing all your old credit cards

Closing your oldest credit card account may reduce your repayment tenure and thus might affect your credit score negatively. Also, closing your previous accounts may lower your thorough available credit, thus disturbing your CUR (credit utilization ratio). Thus, you as a customer must not close your old accounts as your accounts show your long-term association with the lender, which allows boosting the confidence to lend you more credit to the lender whom you approach at present for a loan or credit card. 

Mistake no. 5 – Not assessing your credit report periodically

Availing of credit cards or loans and making repayments usually increases your credit score. However, there can be a few errors or even inaccuracies that may appear on the report that may lower your credit score. Performing a periodic check on your credit report periodically is extremely crucial before you apply for any credit card or loan. Errors might occur on credit bureaus’ part, as sometimes lenders may fail to offer updated details if, in the case, you changed your name or address. 

Mistake no. 6 – Co-signing loans

It is appreciated when you co-sign loans for your nearby or close acquaintances. However, this may come across as a hassle for you in case you miss a few of your payments or make delayed or late payments. Owing to this, your score may be negatively impacted.

Also Check: Bajaj Finance CIBIL Score

Mistake no. 7 – Opting for numerous unsecured credit options.

Zero collateral or security is required if you opt for unsecured loans like education loans, personal loans, business loans or credit cards. Unsecured loans are granted based on your income and credit behaviour. If you as an individual avail several unsecured loan options, it is considered that you are a risky individual, hungry for credit and prone to loan defaults. Several active unsecured credit options may impact your score in a negative manner. 

Mistake no. 8 – Maxing out your credit card limit

Your credit utilization ratio, or CUR, is one of the major contributing parameters to your score. Usually, lenders do not grant you any new credit option if you max out your credit card limit, thereby pulling down your CUR (credit utilization ratio). When it comes to your credit utilization, ensure to remain between the range of 10 to 30 per cent. 

Mistake no. 9 – Not checking your credit profile and reporting periodically

This is one of the worst errors you may commit as it is one of the simplest and the easiest ones that you may tend to avoid. If you periodically monitor your score, it may enlighten you about any fraud associated with your name, show your score, and allow you to identify your improvement areas. 

Mistake no. 10 – Missed or delayed loan or credit card repayments 

Missed loans or credit card outstanding repayments may have a bad impact on your thorough credit report and score. That is because all credit bureaus ensure to take your repayment history into account when generating your score. 1 or 2 missed repayments may not make any difference, but if missed or delayed payments become a regular occurrence for you, then it might create a lot of negative impact on your score. 

Mistake no. 11 – ​Guaranteeing a loan

In case you​ become a guarantor of a loan on behalf of someone, it means you are taking responsibility for repaying the loan on time without fail. Not only this, but it may also even reflect upon your report. If the repayment of this loan is delayed or missed, it may leave a negative impact on your score, too as well along with the score of the primary loan borrower.

You May Also Like


About the Author: Micky Aron

Leave a Reply

Your email address will not be published. Required fields are marked *