A credit score is a three-digit number that is generated by credit agencies. It is a determining factor of your credibility. While applying for a personal loan or for a credit card the lender/credit card issuer checks your credit score. It helps them to decide whether to accept your application or not.
If you have no credit history then it becomes a tad bit difficult to get a loan or a credit card. You can build your credit score with the help of third-party app features like Buy Now Pay Later. This helps you to build your credit score from the scratch. There are some factors that can easily impact your credit score that you need to be mindful of. Without any further ado, here are the factors that can affect your credit score.
- Repayment History: One of the most important factors that impact your credit score is your repayment history. Frequently defaulting on the payment of your debt or your credit card dues then your credit score is going to fall down. Timely repayments of borrowed funds are the only way to improve your credit score.
- Multiple applications: Never ever apply for multiple credit cards in one go. Seeing multiple applications can drive away from the credit card issuer because it is showing your hunger for credit. Typically card issuer believes that the applicants who send multiple applications will not repay the dues on time and rejects your applications right away. This also impacts your credit score negatively.
- High credit utilization ratio: Using your credit card beyond the provided credit limit or more than 30% can easily affect your credit score. To build a good credit score you need to maintain a low credit utilization ratio between 30% – 40%, for this you can set a threshold limit.
- Request for a higher Credit limit: If you have just received the credit card or it has been 6 months and requesting for a higher credit limit can impact your credit score negatively. You should actually use your credit card for at least a year or more than a year in order to become eligible for the credit limit enhancement. Applying for it at the early stage will result in the rejection of the request.
- Hard inquiries: Avoid generating hard inquiries against you as it can affect your credit score negatively. Hard inquiries are generated when you have sent multiple applications or requests for a credit limit enhancement. Avoid these two things so that your credit score doesn’t fall down.
Bottom Line:
To summarise, we hope that the above-mentioned factors are clear to you and you can avoid affecting your credit score. A credit score is a crucial factor in determining your creditworthiness it helps you in getting loans or credit cards easily. Adhere to the timely repayment cycles so that you can build a good credit score. If you have any queries do comment below we would love to address them. Also, do share your tips on one can improve their credit score or protect from getting affected in the comment section.
Additional Reading – How To Use A Credit Card Wisely To Build A Credit Score?