InvestorQ : What are the factors that affect my credit score?
divya Sing made post

What are the factors that affect my credit score?

Answer
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Gauravi Patel answered.
2 years ago


Any person who wants to take any kind of a loan must be aware of his/her credit score. This is because a credit score can make or break your chances of getting a loan, especially when it comes to a bank/NBFC.
A lender will be more comfortable lending to a person with a good repayment history, as is reflected by a good credit score.
Factors that affect your credit score:
- Paying your dues on time
Your credit card is a debt device wherein you take a sort of a loan from a bank until you repay it. Thus, you must give credit card bills as much importance as you give your EMIs or equated monthly instalments. If you default or pay your credit card bills late, it will have a negative impact on your credit score, so ensure you pay your bills on time.
- Missing a loan installment
A loan, whichever type it may be, is one of the most important credit you take in your life. This is because poor repayment history can mar your chances of securing a loan later in your life. You must, at all times, maintain a good track record with regards to your loan EMI repayments. This will help you build up your credit score.
- Paying minimum balance of your credit card
This is a cardinal sin, as you not only attract extremely high rates of interest on the remaining, unpaid account, but it also works against you when it comes to taking a loan.
Other factors that can lower your credit score:
- Completely ignoring your loan dues/credit card bills
- Having your account charged off if you don’t make your payments on time
- If you do not pay your dues on time, lenders use third-party debt collectors to retrieve the loan amount from you. This, having your account sent to a debt collector, reflects very poorly on your credit score.
- Filing for bankruptcy
- Closing a credit card that has an outstanding balance
- Maxing out, or using your credit card limit entirely
- Closing your old credit cards as this shortens your credit history
- Applying or enquiring for multiple credit cards or loans within a short duration makes lenders think you are credit hungry
- Having only one type of credit account will negatively impact your credit score
- Failing to check your credit report and fixing errors, if any.