A good credit score in India is not a number—it’s your financial passport. Whether it’s for a home loan, car loan, or even that sleek premium credit card, your score usually determines lenders’ perceptions of you.
But lots of Indians still have myths and half-truths that sabotage their scores without them even knowing it. Let’s dispel the haze and examine the 7 worst credit score mistakes people make—and the correct approach to handle them.
1. Assuming Salary Automatically Increases Your Score
MISTAKE: “I get ₹1 lakh every month, so my credit score will be great.”
✅ TRUTH: Your income doesn’t directly affect your credit score. It’s your repayment behavior, credit utilization, and consistency that matter more.
2. Believing Zero Credit Means a Perfect Score
MISTAKE: “If I don’t take loans or use credit cards, my score will be perfect.”
✅ TRUTH: With no credit history, lenders have no proof of your repayment ability. A thin file often means a low or even nonexistent score.
3. Overdue Payments (Even Once)
MISTAKE: “One missed EMI or late payment won’t matter.”
✅ Truth: One default can seriously dent your score. Consistency is the key—always pay EMIs and credit card bills on time.
4. Excessive Usage of Your Credit Card
MISTAKE: “As long as I repay in full, I can max out my card.”
✅ TRUTH: High usage (using more than 30–40% of your limit) warns lenders of risk, even if you pay on time. Use only moderately.
5. Assuming Loan Settlements Bounce Your Score Back
MISTAKE: “If I settle my loan with the bank, my score will bounce back.”
✅ TRUTH: Settlements are noted as “part payment” and damage your credit report. You’re better off restructuring or negotiating repayment terms.
6. Repeatedly Seeking New Credit
MISTAKE: “If one bank denies my loan, I’ll apply at five more.”
✅ TRUTH: Each loan or card application causes a hard inquiry. Too many inquiries decrease your score and make you appear desperate.
7. Hoping for Overnight Success
MISTAKE: “I paid off my loans, my score should skyrocket overnight.”
✅ TRUTH: Credit scores get better slowly, not overnight. It may take 3–6 months of responsible behavior to notice significant improvement.
PRO TIPS TO INCREASE YOUR SCORE
- Make timely EMIs and credit card payments.
- Use low credit utilization.
- Don’t apply for multiple loans simultaneously.
- Monitor your credit report for inaccuracies.
- Have a combination of credit (secured + unsecured).
Baby steps today can open wide financial doors tomorrow.
THE BOTTOM LINE
A credit score is as good as your financial reputation—it’s built over time with regular habits. Steer clear of these most common mistakes and get the ball rolling toward a healthier financial future.
Additional Reading – ENHANCING YOUR CREDIT SCORE