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Mint
13-06-2025
- Business
- Mint
5 things you wrongly believe impact your credit score
As more borrowers in the country become credit conscious and monitor their credit scores, myths and speculations about what truly influences creditworthiness continue to circulate. Today as things stand due to rapid increase in personal loan defaults, credit awareness is at an all time high. Yet misconceptions persist, often leading to unnecessary anxiety along with poor financial decisions. Several Indians, especially first time borrowers, still believe that factors like income level, marital status, or even checking their own credit score can negatively impact it. That's far from the truth. 'Many first-time borrowers wrongly think income, marital status, or checking their own credit score affects their rating. In reality, only how you manage credit—like timely repayments and low balances—matters,' says Sumit Sharma, Founder of Radian Finserv. 'For young and rural Indians, busting these myths is key to financial empowerment.' Echoing the same, Akshay Aedula, Product and Growth at CRED, adds 'Your credit score reflects how you manage credit, not your income, spending, or how often you check it. The key is responsible usage: pay on time, keep utilisation low, build a solid history, and maintain a healthy credit mix.' 1. Checking your own credit score: One of the most persistent myths is that checking your own credit score will lower it and harm your overall credit profile. In reality, any self check done by you is categorised as 'soft inquiries' that is why it has no influence on your credit score. On the contrary, professionals encourage consistent monitoring of your credit profile as it helps in staying informed and spot errors or fraud early. 2. Your income level: Many borrowers believe that a higher salary or income guarantees a better credit score. In reality the truth is far from this as this is never the case. Your income has no direct relation with your credit score. Your credit score basically is determined by factors such as your credit history, payment behaviour, credit utilisation, level of debt and not your salary. Due to the same issue, someone earning ₹ 5 lakh per year can have a higher credit score whereas someone earning ₹ 10 lakhs may have no score at all if they have never used credit earlier. 3. Debit card usage: Using a debit card for purchasing products or services does not build or impact your credit score. Debit cards draw directly for your bank balance and do not involve any kind of credit facility. That is why do remember that only credit cards, personal loans and other credit products contribute to your credit history. 4. Bounced cheques (Unless for EMI):A cheque bounce is an offence under the Section 138 of the Negotiable Instruments Act, 1881. Still, a bounced cheque does not affect your credit score until and unless they were issued to pay an EMI of a personal loan or credit card pending payments along with any other credit related products payment. In all such cases the missed EMI would be reported but otherwise bounced cheques do not influence your credit score. Lenders check at how you manage your credit and not your general banking habits. 5. Marital status or joint accounts: This is another extremely important myth that needs to be put to rest. Your marital status and joint bank accounts have no bearing on your individual credit score. Credit bureaus such as CIBIL, CRIF High Mark, Equifax among others assess every individual's creditworthiness separately. This is done regardless of whether you have joint accounts or are married. On a fundamental level your spouse's credit behaviour does not influence your credit score. Hence, consistently checking your credit score is a wise decision but rest assured self checks, debit card usage, income level, bouncing of credit non related cheques (unless for EMI) along with marital status do not influence your credit score. Getting a hold on these simple concepts can help you make smarter financial decisions and avoid unnecessary stress. Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
Mint
23-04-2025
- Business
- Mint
750 credit score and still rejected? Here's why premium credit cards say no
A credit score of 750 or more is generally considered excellent in India. Still, many applicants find themselves in difficult situations, facing denial when applying for premium credit cards. This contradiction clearly highlights that a credit score is important but still, it is not the sole determinant for the approval of premium, high end credit cards. Let's discuss some important reasons and considerations such as optimum credit scores, income stability, past loan settlement, payment history, over-all debt etc., that all credit card applicants must be aware of before applying for a premium credit card. According to Akshay Aedula, product and growth at CRED, 'Credit score is an output of past financial decisions and an input for financial institutions to understand the level of risk that you may pose as a borrower. A score above 750 indicates that you can understand and manage credit responsibly, and that you have demonstrated a history of paying consistently and on time. It's a strong signal of creditworthiness.' 'However, different issuers have different cutoffs for eligibility, and credit score is just one factor in decision-making. Beyond a good score, income, employment status, existing bank relationships all play a role.' He further added, 'A high score can also unlock higher limits, faster approval, and access to better cards. If the card you'd like has a higher credit score cutoff, you can set a target on CRED and the feature will provide personalized recommendations to guide you on the right actions to achieve it within the desired timeframe.' Hence, a credit score of 750 or more is generally considered as a strong number for approval of new premium credit cards, personal loans etc. Still, there are numerous other factors that influence the decision of providing premium credit cards to applicants. Employment stability and income: Premium and top notch credit cards come with stringent income requirements. For example, HDFC Bank's Diners Club Black Card makes it mandatory to have a net monthly income of more than ₹ 2.5 lakhs for salaried individuals. Not only this, if you are self employed then you must have an annual income of over ₹ 30 lakhs. Further, erratic job changes, gaps in employment etc., can project instability to the lenders and such developments can result in rejection of applications. Credit utilisation and debt to income ratio: Now, even if you have an excellent credit score, still a high debt to income (DTI) ratio can be a serious drawback. Banks generally prefer individuals who have a DTI of less than 35%. On similar lines, utilising a significant portion of your credit limit i.e., credit utilisation ratio, this may indicate financial pressure and over dependence on credit. Past credit behaviour and lack of accuracy in application: Mistakes in application forms such as incorrect address, incomplete documentation, wrong PAN and Aadhaar details etc., are all such factors that can result in immediate rejection. Further, also applying for several different credit cards within a short period of time can project credit hungry behaviour, which can in turn adversely impact your credit rating and chances of approval. Hence, given a high credit score is a significant asset, it is still important to consider other factors such as employment stability, income level, debt obligations, accuracy with application forms, and meeting all eligibility criteria. For example, for a credit card that has an eligibility criteria of over ₹ 2 lakh monthly income, just a good credit score won't suffice. Therefore, being aware of these rules, criteria and additional requirements can boost the prospects of seamless approval of your premium credit card applications. Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit. First Published: 23 Apr 2025, 03:50 PM IST
