If you have ever taken a loan, or are on the lookout for the one right now, you must have come to hear that your Credit Score is one of the primary factors that determine the approval of your loan application and the interest rate at which the loan is offered to you. In spite of following the best practices, some underlying reasons may be causing your credit score to fall. Let’s walk you through the lesser-known factors that hurt your score.
What is a Credit Score?
Essentially, a Credit Score is a three-digit numeral which ranks you, on the basis of your likeliness to repay a debt, based on your repayment history. Generally speaking, a Credit Score of 750 to 900 is considered excellent, a score of 600 to 750 is considered average, and a score of 300 to 600 is considered poor. The higher is your Credit Score, the more likely it is for the lender to approve your loan application on favourable terms.
More often than not, your Credit Score is determined by the following factors –
Payment History – The more timely and efficient you are with your repayments, the better it is for your score.
Amounts Owed – The lesser is the amount owed by you, the better it is for your score.
Length of Credit History – The longer you have had credit under your name, the higher your score will be (provided, each of the loans is repaid efficiently).
New Credit Enquiries – The higher is the frequency of new credit inquiries, the poorer your score will get.
A mix of Credit Types – It is always considered a healthy practice to have a good mix of credit products, for instance – a Credit Card, a Car Loan, and a Home Loan.
Reasons Hurting Your Credit Score
In spite of knowing and following the best practices, there may be some underlying reasons which may be causing a hindrance in your endeavour to Improve your Credit Score. Let us help you to find out some of these lesser-known facts.
1. Late Payment
Since a major chunk of your score depends on your payment history, making late payments either on your EMIs or your Credit Cards bills consistently can hurt your score substantially.
2. Missed Payments
Ignoring your Credit Card bill is even worse than making a late payment, as far as hurting your Credit Score is concerned. It is a swamp you better steer clear of.
3. Account Sent to Collections
If you haven’t been paying your debt on time, the chances are that your lender will make use of third-party debt collectors to recoup the payments. If this collection reflects in your Credit History, you can be sure of seeing a major dip in your score.
4. Loan Default
If you are unable to repay your loan, as per the terms of your agreement, your lender is likely to report it to the Credit Bureau. A ‘default’ on your account will result in a severe blow to your score.
5. Filing for Bankruptcy
If you are unable to manage your finances and are in severe debt, you may be forced to file for bankruptcy. This is an extreme step and will have a devastating effect on your score. Besides, it will reflect on your Credit Information Report for as long as 7 years, thus proving to be hurdle every time you seek a Credit Card or a loan.
6. Credit Card Balances
While Credit Cards give you the freedom to enjoy the money, without actually paying it right away, you must remember that you need to pay all your dues, well in time. Having a high balance on your Credit Card (nearing your credit utilisation limit) can work against you, and lower your Credit Score.
7. Closing Old Credit Cards
As mentioned earlier, longer Credit History works in your favour. Hence, if you aren’t paying an annual fee, closing an old Credit Card might actually harm you more than it benefits you.
8. Closing a Credit Card With Balance
When you have a balance on a car, which you are unable to pay, you may get tempted to close the card in its existing situation. While it will help you get rid of the card, you will still be liable to pay off the balance. Besides, it would be considered as an irresponsible behaviour on your end, thus resulting in a dip in your Credit Score.
9. Multiple Applications for Credit Cards
Making several inquiries for Credit Cards may lead the credit bureaus to think that you aren’t financially stable and are looking for credits to pay for your expenses. This will understandably result in a drop in your Credit Score.
10. Not Having a Good Mix of Credits
If you only have Credit Cards under your name, and no loans, or vice-versa, it may not help you improve your credit score, especially when you don’t have a long Credit History to boast about. Hence, it is always better to have a mix of credit products so that your repayment behaviour is evident and your score is a little higher.
If you had been looking for an answer for How to Improve your Credit score, we are sure the above-mentioned reasons would have helped you see your credit score in a new light. If so, make sure you stay away from these common mistakes and watch your credit score rise in an unprecedented manner.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Updated On Jul 16, 2026
Written By
Written By Reshma RawatAssistant Content ManagerCredit Cards, Credit Score, Personal Loan, Home Loan, etc.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
