Impact of Gold Loan on Credit Score

Gold loan is the type of a loan where a gold Jewelry is considered as collateral security against the loan amount given by the lender. It is offered at an affordable interest rate in comparison to other forms of secured loans.

How are Gold loan and Credit score related to each other?

A credit score shows how responsibly and sincerely you are managing your finances and handling all your credit payments. Credit score impact applies to all types of loans you take which includes gold loans also. So, any kind of negligence regarding the making of loan repayments will hurt your score.

Learn here different ways a gold loan leaves an impact on credit score:

Gold Loan Application

Every time you file a gold loan application, a hard inquiry is being done by the lender. If you are wondering what a hard inquiry is? So, when the lender requests a credit bureau for a credit report of the gold loan applicant to analyse its creditworthiness, it is known as a hard inquiry. Whenever any lender does a hard inquiry, information about the same is reflected in your credit report. If an inquiry is done multiple times in a short duration of time, it indicates the credit hungry behaviour of the applicant in the lender’s mind. Avoid filing loan applications back to back.

Gold Loan Payments

Once your loan applications get an approval, it is a must for a borrower to repay the loan amount as per the decided terms and conditions of the loan. If you make loan repayments sincerely, it will boost up your credit score and if you fail to do so, it will hurt your credit score.

Regular Payments

If you are paying Gold Loan EMIs before or on time, then you build a good credit score. It shows your responsible credit behaviour and the same is also reflected in your credit report. The lenders always prefer to give loans to such borrowers and even offer relaxation on the gold loan interest rates.

Loan Default

‘Loan default status’ comes when you fail to make timely loan repayments according to the gold loan contract. Any delay in making loan repayment is being reported to credit bureaus by the lender which results in reducing credit score. If gold loan EMI payment default continues for consecutive 90 days, you will get NPA (Non-Performing Asset) label on your credit report – a title that bars your chances to get a loan from other lenders


Now I hope you understand from the above information how a gold loan influences your credit score. Multiple hard inquiries reduce your credit score and making timely gold loan EMI payments can boost it. As far as the case of gold loan default is concerned, it comes with various consequences that differ from one case to another. One easy way to build up a good credit history is to opt for Gold loans.