Bank Loan

Want a Bank Loan? Avoid These 3 Common Mistakes That Can Damage Your Credit Score

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Bank Loan
New Delhi: Whether it’s buying a new house, funding a wedding, or handling a medical emergency, taking a loan from the bank has become a go-to solution for many. From personal loans to home and auto loans, banks offer multiple financing options—but only to customers who meet strict eligibility criteria. And at the top of this list is your credit score—a key measure of your financial reliability.

Unfortunately, many people unknowingly make critical mistakes that damage their creditworthiness. Once your credit score dips, banks become hesitant to lend you money, or worse, reject your loan application outright. Here are the three most common mistakes that could ruin your chances of ever getting a loan approved.

1. Missing or Delaying EMI Payments

One of the biggest red flags for banks is a missed EMI payment. Whether it’s for an existing loan or a credit card, failing to pay on time negatively impacts your credit report. Even a single delayed payment can drop your score by 50 to 100 points. According to RBI guidelines, timely repayment plays a major role in maintaining a clean financial profile. Once your score falls, rebuilding it can take months—or even years—making it increasingly difficult to access future credit.

2. Overusing Your Credit Card

Using your credit card for everyday purchases is perfectly fine. But constantly maxing out your card limit or maintaining a high credit utilization ratio sends the wrong signal to lenders. It indicates that you’re over-dependent on credit and may be struggling to manage your finances. Banks interpret this as a sign of financial stress and might either reject your loan application or offer it at a much higher interest rate.

3. Closing Old Loans or Credit Card Accounts

Many borrowers believe that closing old credit cards or paid-off loan accounts will improve their credit score. In reality, it does the opposite. Older accounts show your credit history length—a critical factor in your overall score. By closing them, you’re effectively reducing the length of your credit history, making it harder for credit bureaus to assess your long-term repayment behavior. This can result in a lower score, even if you’ve been financially responsible.

What Is a Credit Score and Why It Matters

A credit score is a three-digit number ranging from 300 to 900, based on your past credit behavior, repayment history, and overall credit utilization. A score above 740 is considered excellent and makes you eligible for faster approvals and lower interest rates. On the other hand, a score below 579 categorizes you as a high-risk borrower, significantly reducing your chances of getting a loan.

Maintaining a strong credit score isn’t just about qualifying for loans—it’s about ensuring financial credibility and securing favorable borrowing terms when you need them most.

Bottom Line

In today’s economy, where loans are an essential financial tool, avoiding these three mistakes can make the difference between approval and rejection. Be disciplined with repayments, avoid over-dependence on credit, and don’t hastily close old accounts. Your future self—and your bank balance—will thank you.

Author Profile

Kuldeep Singh Chundawat
Kuldeep Singh Chundawat
My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.