5 things that hurt your credit score

Jan 12, 2021

Have you ever considered taking a loan or applying for a credit card to purchase something? If yes, then there’s something you need to be aware of first: Credit score. It is essentially a three digit number that determines how ‘credit-worthy’ an individual is. To be eligible for loans at low interest rates, it's essential that you have a high credit score. Typically, credit scores vary from 300 to 850. A score of 700 and above is considered a good credit score. Maintaining a high credit score is not easy and there are several factors that invariably pull down or hurt your credit score. A low credit score severely limits your ability to take loans, as lenders are very reluctant to disburse loans to people with a low score. Here are the 5 things that hurt your credit score:

1. Late payments:

The most fundamental question lenders ask borrowers is, “Will he/she pay me back on time?”. The very premise of lending money is that borrowers be disciplined in paying their dues in a timely manner. If you cannot be trusted to pay back your loans on time, you will create a negative impression that also reflects in your credit score. The more irregular you are with your payments, the more adversely if affects your credit score. There are several factors that come into play when you start paying your dues late for low credit score personal loans:

  • How late do you pay your dues? The longer the duration, the worse it is for your score
  • How badly does late payments reflect on your credit report? If so, it can hinder your chances of getting loans
  • Do you have any lawsuits, bankruptcy charges, foreclosure notices etc against you? This is a warning sign to lenders that you are not diligent in your payments
  • How frequently do you make late payments? If it's a one off incident, it won't hurt your chances too much.

So remember, late payments lead to a low credit score. A debt trap is not something you do not want to fall into. Delayed payments is one of the top 5 things that hurt your credit score.

2. High level of debt:

Your debt level plays a very important role in determining your credit score. In fact about 30% of your credit score depends on your debt level. But what does this really mean? It is nothing more than the ratio of your credit card balance to your credit limit. Ideally, your credit utilization should be around 30% or less, which means that you should use not more than 30% of your credit limit at any given point in time. This shows lenders that you are responsible with your credit and don’t have a tendency to overspend. A high level of debt always leads to a low credit score, that hinders your ability to apply for future personal or business loans.

3. Unhealthy credit mix:

An unhealthy credit mix is one of several things that hurt your credit score. Your credit portfolio is said to be healthy and balanced, when you have a right mix of both secured and unsecured loans. A secured loan such as a home loan or car loan is one that is backed by collateral such as a fixed asset like a house or a car. An unsecured loan is one that is purely driven by trust between a lender and a borrower. It depends on the “creditworthiness” of the borrower. If you have a high credit score of 750, lenders will welcome you with open arms. If you have way more unsecured loans than secured ones, it can be seen as risky.

However, an absence of unsecured loans is also bad for your credit score. Therefore, make sure you have the right proportion of all kinds of loans.

4. Applying for new credit:

Your CIBIL score takes into account how many new accounts you have. If you have applied for several loans in a short period of time, credit bureaus typically conduct what is known as a ‘hard enquiry’, which essentially means that they will thoroughly investigate your credit history as opposed to a ‘soft enquiry’ which involves simply retrieving your credit history. When credit bureaus do this, you may notice a fall in your credit score. In fact, this is quite normal when you apply for any new loan. However, what hurts your credit score more during this process is applying for too much credit too fast. This raises a red flag among lenders. A low credit score personal loan does not look good when you apply for new credit.

5. Length of credit history:

How long have you been using a credit card? And how far back is your credit history? The age of your credit history makes up almost 15% of your credit score. The older your credit history, the higher your score, provided you pay your dues on time and follow other guidelines including having a healthy credit mix and being responsible. Longer credit basically indicates that you’re more experienced in handling credit and that you understand how to be responsible over a long period of time. Therefore, never close your credit accounts. Even a non-functional account improves your credit score. Closing down several older accounts and opening new ones hurt your credit score. Opening too many accounts at once is one of the things that hurts your credit score and leads to a low credit score.

These are the top 5 things that hurt your credit score. But what if there was an option for you to get a loan without going through the hassles of a credit card? Consider yourself lucky! Rupeek low interest gold loans are a great way to purchase whatever you need, without worrying about your credit score. You just need to place a request on the Rupeek app after finding out the value of your gold through Rupeek’s  gold loan calculator. Following which, Rupeek’s highly trained gold loan personnel will come to your house and do the gold appraisal right in front of your eyes. Once they verify your KYC documents, the loan amount will be transferred to your account and your gold will be safely deposited in trusted bank vaults. You can pay back comfortably within a year through low-interest EMI options.

And that’s about it! So the next time you’re worried about your low credit score, just look at Rupeek low-interest gold loans as an alternative!


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