Lending organizations like banks prioritise your credit score to provide you with different credit products. They also check your age, monthly earnings, location, and employment stability to get you access to necessary funding. Thus, a credit score represents your financial ability to pay back the credit or loan on time.
A credit score nearest 900 can help you get attractive deals on your loans and other financial products. Whenever you ask for credits, you will notice that most non-banking financial companies and banking institutions prefer a credit score exceeding 750. Credit score calculation depends on your credit age, payment history, credit duration, and other associated points.
5 Factors That Harm Your Credit Score
Below are some of the most prominent considerations that negatively affect your credit score.
1. Sending Multiple Credit Inquiries
Have any of your loan applications recently got rejected? Then, it's not an ideal time to apply for credit. Give yourself enough time to improve your credit score, and then re-apply for another credit.
Whenever you make your credit card or loan applications, the applied lender will practice hard inquiry to evaluate your creditworthiness. When they notice that you have already sent a couple of credit applications at once, it gets reflected on the reports and negatively affects your credit score.
2. Discontinuing Old Account
One of the best ways to build a preferable credit history is to have credit cards for many years. If you decide to close these accounts, it will end up falling your long drawn credit history linked with it. Hence, keeping these accounts open for the maximum time is advisable. It must be relatively new if you desperately want to close any credit card.
3. Not Having a Balance of Credit Mix
Lenders prefer borrowers to have a healthy balance of secured and unsecured loans. Possessing only a single number of credit types can harm the credit score. Therefore, practice having auto loans or personal loans and credit cards.
4. Discrepancies in the Credit Report
Financial advisors always suggest regularly checking CIBIL reports so that there are no errors found. Having any discrepancies in the credit report can hold back your score. Thus, it is always recommended to rectify the errors as soon as possible in your lending organization. You can also point out your exploitation of identity theft by evaluating the credit report.
5. Reckless Payments
Your lenders check your current and past payment report to understand your responsibility towards making timely payments. Always try to disburse your EMI and credit card dues each month to avoid late payments.
Setting alerts for timely paying off your bills is wise when you hold several loans and credit cards. Once you miss your overdue, it poorly reflects your credit score and indicates your inconsistency in repaying debts.
Ensure Having a High Credit Score
When you try to enhance your credit score, you will get access to multiple benefits, such as attractive deals on credit cards, speedy approval of loans, discounts on loan charges, lower interest rates on loans, etc. Always live within your limits and pay bills wisely to save on your pocket.