Bad Credit Practices that Lead to Bad Credit Score

Having a good credit score (CIBIL score of 750 and above) opens your window to premium credit cards, better loan offers and affordable interest rates. On the contrary, a bad credit score (below 700-650) is likely to pull these offers away from you. However, it is better to call it a lower score because there are 4 credit bureaus at work in the country and a bad credit score becomes a relative term. 

A bad credit score can lower your chances of getting good loan offers. Check Score

What is a Bad Credit Score?

Bad is a relative term and hence it is better to use the term, a ‘low credit score’. Your credit score ranges from 300 to 900. If this number is going further down from 650, you need to evaluate your credit health. However, this number varies from one credit bureau to another. 

*Ratings of one credit bureau are different from that of the other. Thus, you should consider these scores as indicative numbers only. For exact rating, you should check your credit report generated from Paisabazaar.com.

What leads to a bad/low credit score?

Check the table below to understand the good and bad practices that can affect your credit score: 

Also Read: What’s the 10 best ways to increase someone’s credit score fast?

How will a bad credit score impact you?

A bad or lower credit score may impact you in multiple ways since you’re viewed as a big risk by the mainstream lenders and this is not a good thing. Following are the demerits of having a low credit score:

1. Banks will most likely give you a loan at a higher rate of interest which means you will end up paying more than someone with a better credit score, say 750 or more. This is because banks and other financial institutions may view you as a risky customer and thus would like to recover their loan as soon as possible by levying heavy interest.
2. You will not be able to access premium credit card benefits. When your credit score is high, you are given good introductory and/or cashback offers. You may also get good deals on shopping and movie tickets. A bad score may make you miss out on all these. 
3. You may have to pay a higher insurance premium. Nowadays, insurance companies check your credit score to see how reliable you are with timely payments. If you’re paying your credit bills and/or EMI payments on time, it will up your credit score. This will in turn make the insurance companies confident of your premium payments in time.

In a nutshell, it is advised to keep your credit score as high as possible. To tackle such a situation, use less than 30% of your credit limit and always pay your dues on time. Also, do not apply for multiple credit cards and/or personal loans in an arbitrary manner. These three factors shall definitely help maintain a good credit score. 

Check if your credit score has increased after following these good credit practices. This Way