Hidden factors affecting credit score have a strong influence on loan approvals, credit card eligibility, and interest rates and while most people know that payment history and credit utilization matter, there are several lesser-known elements that can bring down your score also understanding and managing these factors can protect your financial health and improve your chances of securing better loan deals.
Default in Co-Signed Loans
If you co-sign a personal loan and the main borrower defaults, your credit score drops as if you missed the payment yourself. The default appears on your report. Therefore, avoid co-signing unless it is absolutely necessary.
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Higher Number of Accounts with Balances
Carrying balances on several accounts increases your credit utilisation ratio also this signal higher risk to lenders. As a result, your score goes down. Debt consolidation is a recommended way to handle such situations.
Average Age of Accounts
Closing old accounts lowers the average age of your credit history. Even if the account stayed active for years, closing it harms your score. Keep old cards open with small recurring charges to maintain a long credit history.
Hard Inquiries
Every time you apply for new credit, a hard inquiry shows up on your report. Each one lowers your score slightly for up to a year and multiple inquiries signal financial stress and reduce approval chances.
Missed EMIs
Missing an EMI not only leads to penalties but also damages your repayment record also lenders see this as an inability to handle debt, and it reduces your score immediately.
No Loan History
If you do not have any active loan or credit card, lenders lack data to assess your repayment behaviour and with no history to rely on, your credit score suffers.
Unused Credit Cards
Owning but not using a credit card harms your profile alos lenders cannot judge your repayment patterns, which weakens your creditworthiness. Regular but small usage helps maintain your score.
Too Many Cards and Loans
Holding several unsecured loans and multiple credit cards indicates excessive spending. Managing payments for all of them is challenging. Late payments lead to negative reporting and a lower score. ICICI Bank notes that applying for many cards in a short period also reduces average credit age.
EMI Conversion of Credit Card Payments
Converting card dues into EMIs signals overspending. It suggests that you are living beyond your repayment capacity and this lowers your overall credit score.
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Negotiated Settlement
Requesting a one-time settlement with a lender allows repayment of less than the actual dues. However, lenders report settlements to credit bureaus and this record makes it difficult to access fresh credit in the future.
