A strong credit score is crucial for accessing loans, credit cards, and favorable interest rates. Yet, many people unknowingly make banking mistakes that can negatively affect their creditworthiness.
Understanding these common pitfalls can help you maintain a healthy credit profile and secure better financial opportunities.
1. Missing EMI or Loan Payments
Delayed or missed EMI payments on home loans, personal loans, or auto loans have an immediate negative impact.
Even a single missed payment can lower your CIBIL score by 20–50 points.
Tip: Set up auto-debit to ensure timely repayment.
2. High Credit Card Utilization
Using too much of your available credit limit signals over-reliance on debt.
Keep credit utilization below 30% of your total limit to maintain a healthy score.
Tip: Pay credit card bills in full or maintain low balances.
3. Frequently Applying for Credit
Multiple credit applications in a short period create hard inquiries, which reduce your score.
Tip: Only apply for loans or cards when necessary and avoid “loan hopping.”
4. Ignoring Errors in Credit Reports
Errors such as incorrect personal details, unreported payments, or duplicate accounts can lower scores.
Tip: Check your credit report annually and dispute inaccuracies with the bureau.
5. Closing Old Credit Accounts
Closing longstanding accounts reduces your average credit age, which is a factor in scoring.
Tip: Keep old credit cards active but manage usage responsibly.
FAQ:
Q1. How much does missing an EMI affect my credit score?
A: Even one missed EMI can drop your score by 20–50 points, depending on your history and loan type.
Q2. What is the ideal credit utilization ratio?
A: Keeping utilization below 30% of your total credit limit is considered healthy.
Q3. Can checking my own credit report lower my score?
A: No, soft inquiries like checking your own report do not affect your score.
Q4. How often should I review my credit report?
A: Ideally, at least once a year or before applying for major loans.
Q5. Does closing a credit card help my credit score?
A: Closing an old account can reduce average credit age, potentially lowering your score.
Conclusion
Maintaining a strong credit score requires discipline, awareness, and proactive monitoring. Avoiding these common mistakes — from missed EMIs to high credit utilization — ensures financial health, easier loan approvals, and better interest rates.
Published on : 10th October
Published by : SMITA
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