You must be knowing what a credit score is. This score is obtained with help of CIBIL in India and it determines the risk that a bank or a financial institute faces while giving you a loan. You would need to declare the credit score while you purchase anything on EMI, Apply for Credit Card, Apply for Home or Card or Any other type of loan. In addition to this, today, employers have also started seeking credit score before offering employment to any individual.
What Affects Your Credit Card Scores – Find Out Here
The credit score also determines the interest rate as the higher the risk, the higher the interest rate is. It gives an idea of how financially responsible you are and moreover, the higher interest rates are offered so as to discourage you from applying for additional loans. In this article, we are going to talk about 5 factors that can negatively impact your credit score and you must immediately stop doing those things for a better credit card score. It can take up to 6 months to rectify the score for yourself. Let us now have a look at all these points.
- Make Payments on Time (Payment History) – This is one of the most important factors and the lender would always want to know if they would get back the money that they are paying you. This surely determines the risk of giving you a loan. As per the information available, the payment history covers up for a weight of 35% of your credit score. You need to ensure that you make the payments on time and you also need to ensure that you long do you take to make the payment if you are late. Defaulting on EMI and Credit Card bills is surely not a good sign and hence it would negatively impact your credit score. Filing for bankruptcies or opting for debt settlement is another part which is covered in this point and it adversely impacts your credit card score.
- Do Not Make Out your Credit Cards (Credit Utilization) – Another factor that holds almost 30% of weight is the total that you have. The higher the debt, the higher the risk that you carry. This is often termed as Credit utilization Ratio and to make it simple, it is basically the credit obtained vs the credit limit that you have. In this factor, it is always better to have a little debt on the account. Having a 0 balance is not always a good sign either. This is segregated as per the type of account and you can check for the same when you access your credit report online.
- Do Not Close the Cards Not in Use (Time) – You must be thinking what this time is all about. Well, to explain to you better, we can say that it is the time since you have been using debit or credit for yourself. The age of your oldest account is considered in this case and a long age helps you in having a good credit score. This means that you have been making payments on time and this particular factor contributes about 15% to your CIBIL Score. Even if you are not using a credit card, we would recommend you to leave it open as it would positively impact your credit score.
- Avoid Using Credit Card Only (Type of Debt) – The next factor that is considered is the type of debt that you have on your account. This also gives an idea of the number of accounts you have. Having a diversity here is a better option and it also positively impacts your credit card score. It should be noted that this factor contributes about 10% to your CIBIL. It is not a major concern even if you have only one type of credit on your account as the contribution made via this factor is quite low.
- Applying for Multiple Cards (New Account) – You can also look at the new credit accounts that you have and it also contributes about 10% to your credit score. A relationship is established between the number of applications you submitted and the number of new accounts you have to get an idea about your financial image. You would have heard people talking about the fact that a credit inquiry leads to a decline in credit score, well as per one of the source, it is right to say that and there is a decline in credit score temporarily
You May Like To Read: Advantages and Disadvantages of Credit Card – Review 2019
This was all the information about the factors that might impact your credit card score negatively. In addition to this, you must note that factors like your age, marital status, income, occupation, educational qualifications, and other such things do not impact your credit score and you do not have to be worried about that.