Mistakes That Can Negatively Impact Your CIBIL Score

You should always pay your dues on time to maintain a strong credit profile. 

• Late payments reduce your score immediately 

• Defaults remain in your report for years 

• Even one missed EMI impacts your score 

High Credit Utilisation Ratio (High Impact) 

You should maintain a low utilisation ratio to protect your score. 

• Use less than 30% of your credit limit 

• High usage signals financial stress 

• Maxing out credit cards reduces your score 

Applying for Multiple Loans Frequently 

You should avoid applying for multiple loans within a short period. 

• Each application creates a hard enquiry 

• Too many enquiries reduce your score 

• Makes you appear credit-hungry 

Ignoring Digital Lending Behaviour (2026 Update) 

You should manage your digital borrowing carefully to avoid score drops. 

• Buy Now Pay Later (BNPL) usage affects your score 

• Instant loan apps report to credit bureaus 

• Frequent short-term borrowing reduces your score 

Settling Loans Instead of Closing Them 

You should avoid loan settlements unless necessary. 

• “Settled” status negatively impacts your report 

• Indicates incomplete repayment 

• Reduces future loan approval chances 

Errors in Your Credit Report 

You should regularly check your credit report for accuracy. 

• Incorrect entries can lower your score 

• Duplicate loans or wrong defaults may appear 

• You can raise disputes online easily 

Not Having a Credit History (NH/NA Score) 

You should build a credit history early to improve eligibility. 

• No credit history leads to NA/NH score 

• Lenders cannot assess your risk 

• Reduces approval chances 

Closing Old Credit Accounts 

You should keep older accounts active to maintain your credit history. 

• Reduces length of credit history 

• Impacts your score negatively 

• Lowers your available credit limit 

Limited Credit Mix 

You should maintain a balanced mix of credit types. 

• Use both secured and unsecured loans 

• Lack of variety reduces your score 

• Balanced mix improves your profile 

Co-signing Loans Without Caution 

You should be careful when acting as a guarantor. 

• You are responsible for repayment 

• Missed payments affect your score 

• Can increase your financial risk 
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Key Factors Impacting Your Credit Score

Payment History

On-time EMI & card bill payments

35%

Credit Utilization

Percentage of available credit used

30%

Age of Credit

Average age of all open credit accounts

15%

Total Accounts

Total open/closed credit accounts

10%

Credit Enquiries

Total hard enquiries by lenders

10%

Negative Accounts

Written-off or settled accounts

Soft vs Hard Enquiries 

You should understand how enquiries affect your score. 

Impact Summary Table 

You should review how each mistake affects your score. 

How to Avoid These Mistakes? 

You should follow these steps to maintain a healthy credit score. 

• Pay all EMIs and bills on time 

• Keep utilisation below 30% 

• Limit loan applications 

• Monitor your credit report regularly 

• Use credit responsibly 

Disadvantages of a Low Credit Score

A low credit score has several disadvantages, few of them are as follows:

• Loan Rejection: Rejection of a loan application due to a bad credit score is one of the major disadvantages of a low credit score. Banks and NBFCs check your credit score before approving your loan application and a bad credit score shows

• Higher Rate of Interest: Some banks and NBFCs may approve your loan application even after a poor credit score, but they may charge a very high rate of interest. In such a case, your loan will be more expensive.

• Lower Credit Limits: Your bad credit score projects you as financially irresponsible. The banks may offer you lower credit card limits due to your bad credit score and perceived risk associated with it.

• Difficulty Getting Premium Credit Cards: Most banks offer premium credit cards or high reward cards to customers with a strong credit score. If you have a bad credit score, you may find it difficult to get a premium credit card.

• Lower Negotiation Power: When you have a bad credit score, you lose the ability to negotiate better loan terms or interest rates. This means that you will have to borrow a loan at a higher rate of interest in times of need.

A good credit score can help you secure lower interest rates on loans and credit cards.

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