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Credit score decides whether a bank or finance company will give you a loan or not. Credit score plays an important role in determining your reputation in the eyes of banks and finance companies.
When as a customer you apply for any type of loan from banks or non-banking finance companies, these institutions evaluate your credit score before giving you the loan.
On the basis of credit score, it is decided how much loan can be given to a person. Additionally, credit score also affects the interest rate payable on the loan. Apart from this, if your credit score is low then banks or agencies may refuse to give you loan.
There are seven such negligence in bank related transactions, which have the potential to affect our credit score. Before your credit score gets spoiled, you should also understand whether you too are doing this carelessly.
Missing EMI-
If you miss paying your loan EMI, not only are you penalized, but it also reflects your inability to repay the loan.
No credit history-
If there is no active loan account or credit card, banks or companies have nothing to understand your credit score. You do not have any credit history on the basis of which banks or companies can decide to give you a loan.
Not using credit card-
If you have a credit card but do not use it, the lender will not be able to trace your repayment pattern. Not using credit cards can hurt your credit score.
Inquiry about loan-
Inquiring too much about the loan makes you a risky candidate in the eyes of the lender. If you inquire about a loan more than once, your chances of getting a loan go down, as lenders consider it a sign of high credit risk, which affects your chances of getting a loan.
Too many cards and loans-
Having a lot of unsecured loans and multiple credit cards is considered a sign of wastefulness by the customer. One problem with having multiple credit cards is that you have to maintain payments for each card every month. Missing or late payment reduces your credit score.
Use of EMI option-
Converting credit card payments into installments indicates spending beyond repayment capacity.
Negotiating and compromising-
The borrower has to pay not only the principal amount but also the interest accrued and any incidental charges imposed by the lender. It is the primary responsibility of the borrower to repay the dues on time and the lender has the right to recover the entire amount.
However, in case of exceptional circumstances, the borrower can request a one-time settlement from the lender, upon which the lender allows the borrower to pay less than the outstanding amount. However, this later has a serious impact on the borrower's ability to take a loan. If you have negotiated with a lender to repay your loan, it is not good for your credit score.
