7 Major Factors that Affect Your Credit Score

Over the past few years, the demand for credit cards and personal loans has increased in India because people find them a convenient option to fulfill their needs. Your credit score plays a significant role in the approval of your loan application or credit that you are requesting from the bank or any other financial institution. 

Many people know this fact, but they still unknowingly make mistakes that hurt their credit scores. Hence, to avoid that, it becomes important that you learn about the factors that significantly affect your credit score, and this article will guide you in the same. Without waiting further, let’s get started. 

  1. Irresponsible Payment Behaviour

Your payment history plays a significant role in your credit score. When you have a high number of late payments, your credit score gets affected negatively. Experts have observed that delinquent loans or EMI repayments can affect your credit score by 100 points straight, and hence paying your dues on time becomes important when you want to maintain a good credit score

  1. High Credit Utilisation Ratio

Many people are unaware of this, but having a high credit utilization ratio can negatively impact your credit score. Experts recommend that you should not use more than 30% of the available limit on your credit card. Using more than that takes a hit on your credit score and sends a red flag to lenders because it challenges your ability to pay back the debt you’ve taken. 

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  1. Outstanding Debt

It is always recommended that you clear off your existing debt because when you have 2 to 3 loans running simultaneously, you will have a poor credit score if you fail to pay them. Your credit report also shows your unpaid dues, and hence it is recommended that you pay them back on time or before the time when it’s a small amount. 

  1. Several loan enquiries

One of the main reasons you should think twice before applying for a loan is its impact on your credit score. Before making multiple loans enquires, ask yourself if you qualify for it. See if you need a loan because the more loan enquires you make, the more your credit score goes down. Applying for multiple loans also makes you look like a credit-hungry person, so you should avoid it. 

  1. Not having a Credit Mix

A perfect credit mix is a mixture of secured and unsecured loans, and hence maintaining it becomes essential. An unsecured loan requires no collateral, whereas when someone applies for a secured loan, they have to pledge an asset to avail that. It is recommended that you have a healthy mix of both to maintain a good credit score. 

  1. Length of the Credit History

When you have a long credit history, the creditors that offer you a loan are assured that you are good at managing your debt and will pay it back on time. Your oldest credit accounts play a significant role in your credit score, so closing them down isn’t recommended. When you close your old credit accounts, your credit score gets impacted negatively. 

  1. Errors in your CIBIL Report

Your CIBIL Score is a very important factor that’s considered when you apply for a loan. When you have errors in your CIBIL Report, your loan process gets affected negatively. Hence in situations like this, you must contact your credit bureau.  

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Benefits of having a good credit score

Having a good CIBIL Score comes with a lot of advantages, and they are listed below:

  • Your loans and credit cards get approved in less time, and getting them becomes hassle-free. 
  • You can enjoy low-interest rates on loans.
  • You get offers for credit cards with more rewards and benefits.
  • You can enjoy Credit Cards with a higher credit limit.
  • Enjoy pre-approved loans and longer loan tenures.
  • Reduced processing fee on your loan applications. 


It is essential to maintain and check your Credit Score on time, and when you avoid making these mistakes, maintaining it will become easier than you think. Ensure that your credit score is above 750 to enjoy easy access to credit products. 

Author Bio: Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].