May Negatively Impact Your Credit Score
If your CIBIL score is high, you will be given several chances, such as increased negotiating power when applying for loans and credit cards, the desired amount of loan profits, and precedence over other people who are also applying for credit. On the other hand, having a poor credit score is one of the primary reasons why numerous loan applications are denied, and among those that are approved, the interest rate is much higher. Therefore, it is essential to have a solid understanding of how serious the consequences of having a low credit score might be for you, as well as the many factors that can have a negative impact on it.
What are the most significant factors that have a negative impact on your credit score?
The following is a list of some of the characteristics that might have a negative impact on your credit score. In the event that you are unable to get them resolved on time, it can result in a never-ending loop that begins with a poor credit score and various loan application rejections due to hard inquiries. If you are unable to get them resolved on time, it can result in a never-ending loop that begins with a poor credit score.
Repayment practises that lack responsibility
The use of credit in a way that is irresponsible is one of the most important factors that might have a negative impact on your credit score. It demonstrates both your incompetence and lack of discipline to fulfil your timely repayments of dues on credit cards and EMIs on loans. It is possible that it will take a number of years for you to improve and reclaim your credit score, regardless of whose credit bureau you use to get your score (CIBIL score or High mark credit score, for example).
Undisciplined behaviour regarding the repayment of financial obligations is one of the major characteristics that might have a negative impact on your credit score. It demonstrates both your incompetence and your irresponsible credit behaviour with regard to past-due loan repayments and EMIs. It is possible that it may take several years before you are able to reclaim your score.
Repaying your obligations on time and in full is the approach that is suggested in this scenario. You have the option of approaching the relevant authorities and requesting a grace period if you find that you are unable to make on-time repayments of your credit owing to compelling personal circumstances. You can also do an HDFC cibil score check if you have an account (credit card or loan) with the bank. This will allow you to check your entire payment history as well as your credit history. Doing so will ensure that you keep a high credit score and remain eligible for future loans with interest rates that are reasonable.
A high ratio of used credit to available credit (CUR)
It is advised that you utilise no more than thirty percent of your total credit limit at any one time. If you, as a user of credit cards, use more than this particular percentage, then it demonstrates your excessive reliance on credit, which may result in a fall in your credit score. If you use more than this specific percentage, then it indicates that you are using more than this specific percentage.
The answer that is advised in this situation is for you to make prudent use of your credit usage ratio. In the event that you are confronted with more stringent credit standards, you only need to get in touch with the appropriate financial institution, issuer, or creditor and make a request for a greater credit limit. It is important to keep in mind that the utilisation ratio should not exceed 30 percent at any time.
Unpaid debts or dues
A lower credit score is the outcome of any of the following: delayed, missed, unsettled, or partly satisfied obligations. It is important to be aware that your credit score may suffer if you do not timely settle the outstanding dues since this will be displayed in your report.
Setting up reminders for all of your loan EMIs and credit card dues is the answer to this problem. This will allow you to settle your obligations in a timely manner. In the event that you have an outstanding amount, you may even have the option of converting it into EMIs that are more manageable. You will be able to protect yourself from getting into a vicious cycle of debt if you do this. If you are prompt with your loan repayments, your credit history will not be affected by loans from any bank, including hdfc home loan cibil scores.
Inaccuracies in the consumer credit report
Your credit score might be adversely impacted by any problem, remark, or mistake that is shown in your report. The answer to this problem is that you need to regularly check your credit report and, in the event that there is a dispute, an issue, or a mistake, you need to immediately report it to the relevant lenders or authorities so that they may make immediate corrections. You may assist improve your credit score by immediately filing a complaint with the relevant agency.
When you submit an application for any new credit on a lender’s platform, the lender will do a hard inquiry on your credit history. Be aware that submitting such enquiries several times in a short period of time shows you as a credit-hungry individual anxious for credit. If your numerous credit inquiries give the impression that you are someone who is often looking for more credit, this may have a negative effect on your credit score, which in turn reduces the likelihood that you will be approved for the loan you have asked for.
The remedy to this problem is that you must refrain from making many credit applications in a short period of time. At this point, you need to give some thought to paying a visit to the internet lending marketplaces in order to examine your credit eligibility for various loan possibilities and to submit an application based on your credit score, your capacity for payback, and your income. Even while these platforms will get your report in order to acquire a notion of your eligibility and your capacity for repayment, such queries are not considered to be rigorous inquiries. Instead, they take the form of kind questions. These kinds of soft inquiries have no impact whatsoever on either your credit score or your ability to get credit in the future.
A credit combination that is not balanced
A poor credit score is often the result of an individual’s failure to maintain a healthy credit balance, specifically between secured and unsecured credit alternatives. The answer to this problem is to construct a credit mix that is balanced, which includes constructing a healthy mix of secured and unsecured loans. In light of this, you should investigate the most effective methods for managing both of your credit accounts, and then make it a priority to consult an expert about the steps to take in order to get clarity.
Cancelling out of use credit cards
While for the majority of you, getting rid of your older credit cards may seem like a responsible decision to do in order to lessen your reliance on credit and boost your credit score, this may not be the case. But, alas, that is not the case. Keeping your previous credit cards active will help you retain a longer credit history, which is highly appreciated by credit card issuers and lenders when deciding whether or not to approve your application for credit cards or loans. The answer to this problem is that if you have numerous credit cards and are considering closing some of them, you should opt to cancel relatively younger cards rather than older ones since doing so will not shorten the duration of your credit history.
Making untimely payments on your overdue obligations
If you want to have a decent credit score, you need to make sure that you don’t fall behind on any of your payments, whether they are for your credit card or your instalment loans. Your payment history accounts for the most portion of your credit score, which ultimately determines how high your mark will be. Your credit score may drop more if you miss more payments than usual, which will hurt your overall score. The only way out of this situation is for you to catch up on all of your past-due payments on time and in full.