Things that may be affecting your credit score

His credit score It could be affected by a multitude of factors such as customer product retention, repayment discipline, credit utilization, loan size, loan type, and length of credit history. It is important to understand some of the myths that come with credit scores in order to make informed decisions.

INCOME AFFECTS CREDIT SCORES

No, income does not have a direct impact on your credit score, but it does play a role in your loan and credit card eligibility. Income and salary are measures that are considered for a consumer's ability to repay loans. "A consumer with high income but not disciplined in repaying loans may have a lower credit score compared to a consumer with relatively lower income but more disciplined in repaying loans," Singhal said. Adhil Shetty, CEO of Bankbazaar said that the credit score reflects the amount of credit that is used compared to the total credit limit and how well that credit is managed. "Despite facing a loss of income in part or in full, if you are able to pay your dues and EMI on time, your credit score will not suffer."

NO LOAN MEANS GOOD CREDIT SCORE

It is not true at all, because if there is no loan it means that you do not have a credit history. The credit report looks at how you manage your credit, and the absence of it means there's no way for a lender to understand your financial behavior. Therefore, taking out a loan could become a challenge in the absence of a loan. “You could face challenges using any line of credit if you don't have a credit history. The best practice is to build a credit footprint ensuring timely payment,” Singhal said.

MULTIPLE LOANS MEAN A LOWER CREDIT SCORE

There is a fine line here because multiple loans could mean you are starved for credit and multiple credit inquiries can have a negative influence on your credit score. However, the credit score is affected by the ability to repay the loans and not by the number of loans. If you have multiple loans in your name but manage to pay them off on time, you could have a higher credit score compared to someone with fewer loans but no good payment history. “If your credit utilization is low and if you are able to make all payments on time, then your credit score It doesn't have to come down," Shetty said. Keep in mind that having multiple active loans could increase the burden, which could affect the timeliness of payments.

MULTIPLE CREDIT CARDS MEANS A BETTER CREDIT SCORE

Understanding that too many credit cards means more credit availability and therefore less utilization. For example, if you have six credit cards with a credit limit of 50,000 each, your total credit limit would be 3 lakhs. If your average credit utilization is 1 then your utilization is 33% and Shetty said that this is a good number. However, having multiple credit cards could mean multiple bills and multiple payment dates, increasing the chance of default. “The more cards you have to control, the more likely it is that you will forget a payment, which will affect your credit score. Have only as many cards as you can handle. Don't go overboard with that,” said Wilfred Sigler, director of sales and marketing for CRIF High Mark. Singhal said having too many lines of credit, even if they're not used, can hurt an individual's credit score by making them appear risky to lenders.

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THE DEBT PAID WILL NOT BE REFLECTED ON THE CREDIT REPORT

Keep in mind that credit reports track your credit behavior for two to three years, and therefore any loans you've had or closed during that time will show up on your credit report and therefore affect your credit rating. credit score. If there were any delays in paying your debt, it would be reflected in your score. Sigler said all of his accounts would appear on the report regardless of whether or not it is paid in full.

EMI MORATORIUM WILL IMPACT CREDIT SCORE

In case you opt for the moratorium on term loans to face any liquidity crisis you may be facing due to covid-19, know that it will not affect your credit score as long as the data is communicated by your bank. However, Singhal said the loans will continue to attract interest even during this period and his total indebtedness will increase, which could affect his eligibility for new loans. As long as it doesn't hurt your credit score, the reality is that you won't be able to get new loans. It is advisable to follow up on your credit report from time to time.