Having a strong CIBIL score endows you with numerous opportunities like high negotiation power on loans and credit cards, desired loan proceeds, and priority over other credit applicants. On the other hand, a low credit score is a major reason for various loan application rejections and a higher rate of interest among the remaining. Thus, it is important to understand how severe a poor credit score can become for you and the different parameters that affect it in a negative way.
What are the important parameters that affect your credit score in a negative manner?
Listed below are a few of the parameters that affect your credit score negatively. In case you are not able to get them resolved on time, it can result in a never-ending loop that starts with a poor credit score, different loan application rejections owing to hard inquiries and, again, a reduced credit score. Read on here to get an answer to the query – “why is it necessary to check my credit score”.
Irresponsible repayment behaviour
Irresponsible credit behaviour is one of the crucial parameters that affect your credit score negatively. It shows your inability and your lack of discipline to meet your timely repayments of credit card dues and loan EMIs. At times, it may even take many years to improve and regain your credit score, may it be a credit score of any credit bureau – CIBIL score or a High mark credit score.
Undisciplined credit repayment behaviour is one of the important parameters that affect your credit score negatively. It shows your inability and indisciplined credit behaviour towards due repayments and loan EMIs. At times, it may even take many years to regain your score.
The solution recommended here is to repay your dues on time and in full. If you are not able to manage your timely credit repayments due to genuine reasons, you may approach a concerned authority and ask for a grace period. You can also do hdfc cibil score check if you have an account (credit card or loan) with the bank and check all the payment history and credit history to ensure you maintain a high credit score & stay eligible for future loans at reasonable interest rates.
High credit utilization ratio (CUR)
It is recommended to use only 30% of your available credit limit. If you, as a credit card user, use more than this specific percentage, then it shows your high dependency on credit, which may result in a decrease in your credit score.
The solution recommended here is you must use your credit utilization ratio judiciously. In scenarios of higher credit requirements, you can connect simply with the required financial institution, issuer or creditor and request a higher credit limit. Note that the use of only 30% of the credit utilization ratio is recommended.
Unpaid bills or dues
Delayed, missed, outstanding, partially settled – all of them result in lower credit scores. Note that failure to repay the outstanding dues on time is reflected in your report, which lowers your credit score.
The solution here is to set reminders for all your loan EMIs and credit card dues so that you can timely repay your dues. In the scenario of any outstanding balance, you may even convert them into manageable EMIs. In this way, you can safeguard yourself from falling into any debt cycle. Loans from any bank like hdfc home loan cibil score will not be impacted if you make the loan repayments on time.
Errors in the credit report
Any issue, comment or error in your report can negatively impact your credit score. The solution is that you must timely check your credit report and, in the case of any dispute, issue or error, report them instantly to the concerned lenders or authorities for instant correction. Raising a complaint instantly can help you improve your credit score.
Hard inquiries are made by lenders when you place an application for any new credit on their platform. Note that such inquiries, if submitted several times in a short time span, projects you as a credit-hungry person eager for credit. If you are projected as a credit-hungry person due to multiple credit inquiries, then it may result in a negative impact on your score, which brings your eligibility for the applied loan considerably down.
The solution here is you must not make several credit requests in a short time period. In place, you must consider visiting the online lending marketplaces to check your credit eligibility for credit options and place the application depending on your credit score, repayment capacity and income. While these platforms fetch your report to get an idea about your eligibility and repayment capacity, such inquiries are not looked upon as hard inquiries. Instead, they are soft inquiries. Such soft inquiries do not hamper your credit score as well as your eligibility for credit in any way.
Not balanced credit mix
Negative credit is usually the outcome of the inability to keep a strong credit balance, i.e., between secured and unsecured credit options. The solution here is to form a balanced credit mix, which means forming a healthy mix between unsecured and secured loans. Thus, for this, you must check for the best ways to manage both your credits and then ensure to connect with a professional to discuss what to do to attain clarity.
Closing old credit cards
While for most of you, closing your older credit cards might come across as a disciplined move to reduce your dependency on credit and increase your credit score. However, sadly it is not. Keeping your old credit cards active assists you in maintaining longer credit history, which is highly preferred by credit card issuers and lenders when approving your credit cards or loans. The solution here is that if you have multiple credit cards and looking to close your cards, then choose to close relatively newer cards as it will not reduce your credit history length.
Repaying your outstanding bills late
In case you want a good credit score, you must avoid missing out on your credit card repayments or repayments of your EMIs. Your repayment history receives the highest High mark credit score., which decides your credit score. A higher number of missed repayments results in more dip in your credit score. The only solution here is to meet your outstanding dues on time and in full.
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