What Is The Biggest Killer Of Credit Scores?

The major reason that affects credit scores negatively is delayed or missed payments on loans and credit cards. A single missed payment lowers the credit score and remains visible on the credit report for a long time, thereby affecting the scope of credit and increasing interest rates. Other factors include high credit utilisation, frequent applications for credit, and defaulting on EMIs, among others. The best method to prevent a drop in credit scores is by ensuring timely payments of all dues and maintaining a low credit utilisation ratio. LoansJagat helps compare and choose the best-suited loan options

Key Takeaways:

1. Missing EMI or credit card payments are the factors that affect credit score negatively the most.
2. Always pay the dues before the due date.
3. Try not to apply for multiple loans or credit cards at the same time.
4. Do not leave any overdue amounts unpaid; even if it is a small amount, it will affect your credit score.
5. Get your credit report reviewed on a regular basis.
6. Do not close any of your existing credit accounts; rather, keep utilising them to increase your credit history.
7. Being a responsible borrower has its perks. 

What Is A Credit Score & How Does It Work?

A credit score is a three-digit number that represents your credit history. It represents your ability to meet your financial obligations. This score helps banks and lenders decide whether to give you a loan or not. Having a good credit score is important if you want to take a loan or buy something on credit. A credit score is determined by various factors like repayment records, quantum of loans, credit utilisation, and many more. Credit scores in India range between 300 and 900, with a normal credit score being 700 and above. The higher the credit score, the better your credit history.

Here is how a credit score works in the Indian financial market:

1. Lenders examine your credit score to decide whether you qualify for a loan or credit card.
2. A high credit score can increase your chances of getting approved.
3. Having an excellent credit score can also help you get lower interest rates.
4. Making late payments and defaulting on loans can affect your credit score negatively.
5. Maintaining a good credit score is therefore essential and can be achieved by regularly paying back your Equated Monthly Instalments (EMIs) and credit card dues on time.
6. A good credit score also helps you maintain a low amount of credit utilisation, which is another factor that can increase your credit score.

A good credit score allows you to get a loan with ease as well as at a lower rate of interest. By regularly paying off your EMIs and credit card dues on time, you can build up a good credit history and boost your credit score, enabling you to take advantage of the various benefits associated with a strong credit history.

What Kills a Credit Score?

Your credit score indicates your ability to manage debts. Some of the common activities and behaviours are listed below, which may damage your credit score: 

Credit report errors 

Credit report errors will also lower your credit score.

Neglecting your credit 

If you do not check your credit report regularly, you will not be able to detect any mistakes or irregularities in time.

Co-signed loans

If the main debtor fails to pay back the loan, their score and yours will plummet.

Credit scores are hard to build but easy to lose. It is essential to maintain a good credit score to help you get approved for various types of credit. A high credit score also assists you in obtaining better credit terms and interest rates.