Minimising EMIs Count Can Improve Your Credit Score? Find Out Now!

Radha, a 32-year-old from Mumbai, believed in "Aaj kamao, aaj udhao". Her lifestyle was all about enjoying the moment—the latest iPhone (₹1,500 EMI), weekend Goa trips (₹5,000 on credit card), a fancy car (₹12,000 EMI), and a personal loan for home interiors (₹8,000 EMI). Every month, her total EMIs hit ₹40,000, but she never really thought much about it.

Then came the “Reality Ka Thappad”—she applied for a home loan, dreaming of her own flat in Mumbai, but the bank outright rejected it. Her credit score had dropped to 650. The loan officer shook his head and asked her, "Madam, itne zyada EMIs? Tension-free ho ya credit score free?" A large number of current loans increased her credit risk to the loan officer.

Radha finally realised, “Paisa udane ka nateeja, credit score ka chakkar!” She had been paying EMIs blindly without thinking about their long-term impact. To arrange her finances, she devised a plan.

• By clearing off her personal loan, she managed to cut down her monthly expenses by ₹8000.
• To bring down her cost of debt, she transferred her credit card balance to another interest plan.
• Stop unnecessary expenses plus drop luxury items to create new savings
• She focused on repaying debts first instead of continuing to take out loans

She followed her strategy without delay for a year. Radha's financial troubles got smaller over time as her credit score increased. Lastly, when she applied again, her score was 750, and the same bank that had rejected her in the first place approved her home loan without hesitation.

As we can observe in Radha's situation, EMIs form huge traps if there are too many of them. Sensible debt handling improves both your financial situation and your creditworthiness.

In the following article, we will explore effective methods to decrease your EMI payments and improve your credit score status.

The Shortcut to a Rockstar Credit Score: “EMI Se Azaadi!”

You need to handle your EMI payments well to receive the best loan offers on hand. The solution to good borrowing depends on how well you manage your EMI payments. When you have many loans, your credit score suffers, yet a well-considered plan helps improve your rating.

Keep Your EMI Count Low

Several active loans indicate you have heavy debt with an increased likelihood of financial risks. Keep only basic EMIs and decline unsolicited borrowing opportunities.

• As a marketing professional, Radha handled multiple loan payments, including car, personal loan, and credit card bills. She realised that she needed to settle debts to secure more favourable loan conditions upon discovering that her bad credit history impacted her mortgage loan application.

Prepay and Close Loans Early

Prepaying your loans lowers debt tension and improves your credit score. Start with high-interest loans.

• Radha paid off her personal loan using her savings first, and this reduced her EMIs by ₹8,000 per month, so she had more funds to settle other debts.

Pay Credit Card Bills in Full

Paying only minimum payments accumulates loans over a longer period. Clearing the full credit card amount every month helps you maintain good credit utilisation and can enhance your score.

Avoid Multiple Loan Applications

Too many loan enquiries in a short time make lenders cautious. Seek loans one at a time as needed after giving yourself enough time between applications.

• Radha attempted to obtain numerous back-to-back loans within a brief time frame, which painted her as a high-risk debtor. She learnt that having a consistent financial record in addition to waiting patiently improved the chances of her loan approval.

Balance EMIs with Income

The amount you pay out every month for your loans must remain between 30% and 40% of your normal income. When debts become too difficult to handle, call loan providers to negotiate improved payment terms.

How EMI Payments Shape Your Credit Score

Your credit score depends on these five main criteria. The following elements influence your credit score results:

Why Paying Off Loans Faster Works: "Jaldi Khatam Karo, Zyada Bachat Karo!”

When you pay off loans early, you gain better financial stability while building up your credit score. Here’s how:

Reduces Interest Costs: You save money on interest payments because you pay off your loans ahead of schedule.

Improves Credit Score: Lowering debt amounts enhances your credit usage ratio and financial ratios, which raises your credit standing.

Reduces Financial Stress: Having less money paid toward EMIs lets you save and invest more.

Enhances loan eligibility: Your ability to take out new loans improves because you now have better conditions for interest rates.

Frees Up Credit Limit: Your credit rating improves when you pay off credit card EMIs first because this makes more credit available for the future.

• Example:

Radha obtained a personal loan amounting to ₹200,000 with equal monthly installments of ₹8000 over a 3-year period. After securing her bonus of ₹1,00,000, she used half of those funds to pay off her loan. She cut the loan period from 36 months to 18 months and earned back more than ₹20,000 in savings. 

Paying off your loans faster grants you financial independence and strengthens your chances to access good financial chances ahead.

Loan Prepayment: ‘Real Hero or Overhyped Villain?’

The common idea of repaying loans before their due date appears good but brings mixed results. Examining both positive aspects and drawbacks will help us decide.

Example Scenarios

• Hero Move: Radha received a ₹500,000 personal loan at 12% interest with a five-year payment schedule. She settled her debt two years early by paying back ₹2,00,000, which lowered her total interest cost to ₹40,000.
  
  
• Villain Move: Radha planned to pay her mortgage early but learnt she would miss out on tax deductions worth ₹50,000. She spent the funds on a mutual fund because it brought in extra earnings.

“Dhandho Ka Naya Mantra: Top Strategies to Manage EMIs Smartly”

Controlling the regular payments of your EMI will lower money worries and boost your credit score. Here’s how you can do it:

Too Many EMIs? “Mat Bano Credit Score Ka Villain!”

Running many loans together will damage your credit score. Lenders consider borrowers with too many loan payments to have high risk when making decisions.

How Too Many EMIs Can Hurt Your Credit Score Performance

• Higher Debt Burden: The lenders will deny loan applications when your overall monthly EMI payments reach more than 40% of your monthly income.
  
  
• Lower Credit Score: Multiple loans damage your credit score because they enlarge your credit-debt usage ratio and boost your debt load.
  
  
• More Financial Stress: Managing multiple EMIs puts more financial pressure on you, which may result in late payments and create serious cash flow problems.
  
  
• Frequent Hard Enquiries: Each time you apply for a loan, the lender adds a hard enquiry to your credit record, which brings down your score by 5 to 10 points.

Example: Radha’s EMI Overload

Total EMI = ₹55,000 (69% of Radha’s Monthly Income ₹80,000)

How Radha Fixed It:

• She made a personal loan payment of ₹50,000 to decrease her EMI by ₹4,000.
• She moved her credit card debts to an EMI package with reduced interest rates.
• She refused to accept new loans before paying back existing debts.
• She combined all her loans to make her month-to-month payment easier.

Conclusion: ‘Smart EMI Management = Stronger Credit Score!’

Radha’s journey highlights a crucial financial lesson—too many EMIs can trap you in debt, but strategic planning can help you regain control. By reducing unnecessary loans, prepaying high-interest debts, and keeping her EMI-to-income ratio below 40%, she turned her credit score from 650 to 750 and secured her dream home loan.

Managing EMIs wisely is not just about reducing financial stress but also about unlocking better financial opportunities. A well-maintained credit score ensures lower interest rates, higher loan approvals, and greater financial freedom.

If you’re struggling with multiple EMIs, take action today—analyse your debts, prioritise repayments, and make informed financial choices. The road to a rockstar credit score begins with managing your EMIs smartly!

FAQs

What number of EMIs do I need to handle without damaging my credit score?

Your credit rating stays strong if you control EMI payments to 30-40% of your income.

What happens when I fail to make my EMI payment?

Not paying an EMI payment affects your credit rating and brings financial penalties from the lender.

Do higher monthly instalments boost my credit rating?

Selecting larger EMIs for your loans enables you to reach your higher credit score sooner because your repayment term will decrease and you will pay less interest.

How quickly does my EMI payment activity show up on my credit report?

After you make an EMI payment, your lender will most likely report it to credit organisations between 30 and 45 days.

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?