Things That Are Ruining Your Credit Score

Things That Are Ruining Your Credit Score

20 December, 2022

If you’ve ever applied for a loan of any kind or even bought a credit card, you would have come across a crucial financial term: credit score.  An efficient credit information system forms the foundation of a sound financial system. This is the role and function of the Credit Information Bureau (India) Ltd, as it is responsible for tracking and monitoring credit-related activities of companies and individuals. The credit score they assign is also called CIBIL Score.

Simply put, credit score determines an individual's creditworthiness. It is a vital part of the loan approval process.

So, let us dive deep and understand what factors affect your credit score and ways to maintain a good score.

What is a credit score?

This 3-digit number is a person’s financial credibility score. It indicates how trustworthy a borrower is. Credit bureaus calculate this score based on multiple factors. These include a person’s credit history, repayment records etc. Hence, the credit score can decide the fate of loan applications. While a bad credit score may hamper the approval process, a good credit score offers several benefits. So, what is the scale on which a person is rated?

The credit score ranges from 300-900, with 900 being the highest. Generally, a score of 750 and above is considered excellent. Such high ratings can leverage your negotiation power with lenders.

Things that can ruin your credit score

It may take years to build financial credibility and a good credit score. In contrast, a few misses can ruin that score, completely. Here are things that can significantly impact your credit score.

  1. Delayed or missed credit card payments:

    redit history is the most crucial factor in determining a credit score. Hence, if you miss or delay paying your Credit Card bills even once, your credit score may drastically drop.

  2. Late payments of utility bills:

    Imagine a situation where an individual is diligent about the timely payment of Credit Card bills. However, they keep missing the bill payment for their postpaid phone connection over and over again. This can also lower your credit score. Besides Credit Card or loan payments, utility bill payments can also result in a poor credit score.

  3. Defaulting co-signer for a loan:

    Co-signing a loan for your near and dear ones might seem the right thing to do. However, remember that you are using your financial credibility as a guarantee for that person’s borrowing. Being a co-signer means you accept the responsibility that if the primary borrower fails to pay the lender, you'll step in and clear the dues.

  1. Length of credit history:

    The length of your credit history considerably affects your credit score. This includes all your credit accounts: the oldest one, the newest one and the average age of all the accounts. A more extended credit history means a higher credit score.

  2. Credit mix:

    Often overlooked by consumers, the diversity of your credit accounts also affects your credit scores. Maintaining a diverse mix of credit accounts reflects your ability to manage credit effectively.

We must financially discipline ourselves to maintain a good credit score. A disciplined approach includes habits like paying bills on time, keeping a check on debts etc. In addition, you must also utilise the credit optimally.

To learn more about the importance of a good credit score and take measures to improve your credit score, click here.

Are you looking to apply for credit card online? Click here to explore options.

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.

Looking to apply for a credit card online? Click here to explore options.

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