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Things You Didn’t Know Affect Your Credit Score

When planning a loan or getting a new credit card in India, many of us focus on obvious factors like paying bills on time or keeping low debt. But several lesser-known issues can also sway your credit score. In this article we explain what affects your credit score in practical terms, using data and real examples. We’ll cover common credit card mistakes in India and other surprising factors, and share actionable tips to improve your CIBIL score. By the end, you’ll have clear advice on keeping a strong credit rating.

Even one missed payment can hurt your credit score. In fact, payment history is the biggest factor (about 35% of your score). Recent data shows roughly 28% of Indian credit card users missed at least one payment last year. Even a 30-day late EMI or credit card bill can slash your score by around 100 points. In short: pay all EMIs and card bills on time. Set up automatic payments or calendar reminders so you never miss a due date.

Credit Utilization (How Much You Owe)

Your credit utilization ratio is how much of your total available credit you’re using. Experts recommend keeping this below about 30%. In India the average utilization is around 45%, and many cardholders run balances above 70%. High utilization signals to lenders that you’re financially stretched, which can lower your score. To avoid this mistake, try to pay down large credit card balances quickly. Spread out big expenses or use a mix of credit (for example, a small personal loan instead of maxing out a card) so your utilization stays low.

Applying for New Credit (Hard Inquiries)

Each time you apply for a credit card or loan, lenders make a hard inquiry on your credit report. One or two inquiries are usually fine, but multiple applications in a short span add up. Research shows applying for three or more credit cards within six months can knock your score down by 15–20 points. Hard inquiries stay on your report for two years (though they only count in scoring for one year). To avoid this, only apply for credit when you really need it. Use comparison sites to find the best card or loan first, and space out any new applications.

Ignoring Your Credit Report (Errors to Fix)

Many borrowers assume their credit report is automatically correct, but errors are common. An RBI study found about 19% of credit reports contain mistakes that can drag down the score. Errors might be wrong loan amounts, incorrect payment status, or even identity details (like a misspelled name). It’s important to regularly check your CIBIL (and other bureaus’) report – you are entitled to one free CIBIL report per year. If you spot an error, dispute it right away. Correcting mistakes can immediately improve your score.

Closing Old Accounts (Credit History Length)

The length of your credit history also matters (around 15% of your score). Surprisingly, closing old credit cards or loans can lower your score. That’s because it shortens your average account age and can hike up your overall utilization (since you have less credit available). For example, if you’ve had a credit card for 10 years, closing it would erase that long history. Instead of cancelling an old card, consider keeping it open and making occasional small purchases that you pay off each month. This preserves your history and shows responsible use.

Being a Co-signer or Guarantor

If you co-sign a loan or act as a guarantor for someone, their payment behavior affects your credit too. Many people don’t realize this: if the primary borrower misses an EMI, your CIBIL score will take a hit as well. Only agree to be a guarantor if you trust the borrower completely and are prepared to cover the payments if needed.

Credit Mix and ‘Thin’ Credit Files

Your score also considers whether you have a mix of credit types. Having only one type of credit (for example, only credit cards or only one personal loan) might not be as strong as showing you can handle different products. A balanced mix (like a home loan or car loan together with a credit card) can boost your score. On the flip side, having no credit history (for example, if you’ve never taken a loan or used a card) means lenders have no data to judge you by. In that case, your score can be low simply because you have a “thin” credit file. If you have little credit history, start building it responsibly: get a secured credit card or a small loan and make timely payments. Over time this helps raise your CIBIL score.

Summary and Tips for Maintaining a Good Credit Score

In short, what affects your credit score includes not just obvious factors (like on-time payments) but also these often-overlooked ones: high balances, frequent applications, report errors, closing old accounts, acting as a guarantor, and having only one type of credit. By managing each carefully, you can improve your credit score over time.

Here are some key CIBIL score tips to keep in mind:

• Pay on time. This is the single biggest factor. Even one late EMI can cut about 100 points off your score. Use auto-pay and reminders to avoid slips.
• Keep balances low. Use less than 30% of your total credit limit. High utilization (even above 50%) raises red flags. Paying down debt quickly will improve your score.
• Space out new credit. Don’t apply for many cards or loans at once. Three or more new cards in six months can drop your score 15–20 points. Only seek new credit when necessary.
• Check your reports. Review your CIBIL report (and others) at least once a year and dispute any errors. Fixing mistakes can quickly boost your score.
• Keep old accounts open. A long credit history is valuable. Avoid closing your oldest credit card accounts, as this preserves history and keeps your available credit higher.
• Maintain a credit mix. Use both secured loans (like a home or auto loan) and unsecured credit (credit cards, personal loans) responsibly. A good mix shows lenders you can manage different debts.
• Be cautious as guarantor. Remember that co-signing a loan makes you liable too – any late payment by the borrower will affect your score.

By following these tips and staying on top of your credit behavior, you’ll build a stronger CIBIL score. A high score opens doors to better loan terms, lower interest rates, and premium credit cards. Keep informed, use credit wisely, and your credit health will improve over time.