A healthy credit score is crucial to secure a loan or credit card in future. Experts say that it is advisable to maintain a healthy credit score of at least 750 points to leverage credit instruments without any hassle.
Here are a few factors that might affect your score.
#1 Default on loans/Credit Card repayment
Late or non-payment of credit card outstanding and loan EMIs can severely affect your credit score. Each time you default on these credit instruments, your credit score spirals down towards the red zone.
#2 Zero Debt
It might be mentally fulfilling to not having any kind of debt on your head. However, if you don't have a history or borrowing and repayment, you credit score might get affected. Why? It is because credit rating agencies like CIBIL often rate your credit score on the basis of your past repaying history and when you don't borrow, agencies can't track your ability to pay a loan.
#3 Multiple Credit Card Applications
When you apply for a new credit card, your credit rating is checked by the issuer with the credit bureau. When the bureau notices multiple credit card applications on your behalf within a short span of time, you care categorized as a person desperate for credit. It also brings a question mark on your ability to successfully service a financial product.
#4 Loan Guarantor For A Loan Defaulter
This condition is not in your control but it might affect your credit score. If you have been a guarantor to someone who has defaulted on your loan then you will have to face the consequences of a low credit score.
#5 Closing A Credit Card
If you plan to close a credit after repaying its bill then you need to question your decision. It is because whenever you close a credit card, your credit report become shorter and affects your credit score. Hence, it is better to have an active credit card with a regular payment record to maintain a healthy credit score.
Always keep these points in mind to maintain your credit score in the green zone.