Have you applied for a credit card and was rejected due to a poor credit score? Otherwise, you want to apply for a personal loan and realize that your credit score is too poor to lay off employees.
If so, please be aware that you are not alone. A large number of users are facing the problem of poor credit scores or poor credit scores.
There may be multiple reasons. Here we list the key reasons for this.
I. Lack of financial literacy: Many people don’t know how credit scores work, how they affect financial opportunities, or even their presence. Some people mistakenly think that without credibility is good. This prevents individuals from actively building credit records.
ii. Low credit card and loan penetration : Most users still rely on cash or UPI for transactions, which does not contribute to credit history. Therefore, some first-time borrowers find it difficult to obtain a credit card or loan, resulting in limited credit history.
iiii. Poor repayment behavior: Delayed payments or credit card bills and loan EMIs have a significant reduction in default credit scores. Many users pay only the minimum amount payable, resulting in high interest rates and ultimate financial distress.
iv. Over-leverage and high credit utilization: Using more than 30% of the total available credit will have a negative impact on the credit score. Many users tend to issue credit cards or take multiple loans to the greatest extent, thus damaging their credibility.
V. Make multiple loan applications in a short time: Applying for multiple credit cards or loans in a short period of time will lead to inquiries, thereby reducing credit scores. Most people seeking loans realize that frequent rejections can adversely affect their scores.
vi. Inactive credit history: Many people do not accept loans or use credit cards at all, which will not lead to any credit history, so it is difficult to get credit when needed. Closed old credit accounts also eliminate long-term credit history, which negatively affects scores.
vii. An error may occur: There may be errors in your credit report, such as outdated loan records, incorrect personal details, or fraudulent activity. This can lead to poor credit scores. Many users check their credit reports from time to time or raise objections.
viii. From friends and family: Many prefer to borrow from family members or local lenders rather than banks, which won’t encourage formal credit scores.
How to improve your credit score?
1. You should clear your credit card bill and EMI on time.
2. It is important to keep credit utilization below 30% of the total credit limit.
3. You must avoid frequent loan/credit card applications.
4. It is recommended that you check your credit report regularly for errors.
5. You should use your credit card responsibly to build a strong credit history.
((Note: Raising a loan has its own risks. Therefore, it is recommended that you be cautious)
