In a recent NidhiTalks video, Nidhi Sinha, Editor at Outlook Money, highlights three common reasons that can unintentionally harm your credit score even if you diligently pay EMIs and credit card bills.
First, making multiple hard inquiries by applying for several loans in a short time can impact your credit score. While browsing loan options online is harmless, submitting multiple applications signals to lenders that you may be a high-risk borrower. Using aggregator websites to compare rates without formally applying is a safer way to explore options.
Second, failing to close a loan formally can negatively affect your credit report. Even after you have paid off all of your EMIs, you must legally close the account with the lender. Without formal closure, the loan may appear active or incomplete on your credit history, which can drag down your score.
At last, Nidhi Sinha advises caution when closing a credit card. While it may seem like a good way to stay debt-free, doing so can reduce your overall credit limit, increase your credit utilisation ratio, shorten your credit history, and limit credit mix diversity. If the card has no annual fee, keeping it active is usually advisable.
