Top Credit Score Mistakes Indians Make and How to Fix Them

Your credit score is more than just a number—it's the key to securing loans, credit cards, and favorable interest rates in India. In 2025, with increasing reliance on digital lending and fintech, maintaining a healthy credit score has never been more important. Yet, many Indians unknowingly make simple mistakes that harm their creditworthiness. In this guide, we reveal the top credit score mistakes and offer practical steps to fix them.

1. Missing Credit Card or Loan Payments

One of the biggest credit score killers is missed payments. Even a single default can reduce your score by 50–100 points and remain on your report for years. Many people forget due dates or underestimate the impact of a small late payment.

Fix:

• Set auto-debit instructions for EMIs and credit card bills.
• Use reminder apps or calendar alerts.
• Pay at least the minimum amount before the due date to avoid default.

2. Paying Only the Minimum Due on Credit Cards

Many Indians believe paying the “minimum due” is enough. In reality, this increases your debt due to interest and signals poor credit behavior to bureaus.

Fix:

• Always pay the full outstanding amount.
• If not possible, pay as much as you can above the minimum.
• Clear dues before the interest-free period ends.

3. Having a High Credit Utilization Ratio

Using more than 30% of your credit limit regularly can negatively impact your score. A high utilization ratio indicates credit dependency.

Fix:

• Keep credit card usage below 30% of the total limit.
• Request a higher credit limit to improve the ratio (but don’t spend more).
• Split expenses across multiple cards if needed.

4. Frequently Applying for Loans or Credit Cards

Every time you apply for a loan or credit card, a hard inquiry is generated, which slightly reduces your score. Too many inquiries in a short period make you appear credit-hungry.

Fix:

• Limit your loan/credit card applications to when truly necessary.
• Use pre-approved or soft inquiry checks when possible.
• Apply with lenders you have a good chance of approval from.

5. Closing Old or Inactive Credit Cards

Many people believe closing unused cards is a good idea. However, older cards add to your credit history length and available limit—both important for your score.

Fix:

• Keep old cards active by using them occasionally for small purchases.
• Only close cards if they carry high annual fees with no benefits.

6. Not Checking Your Credit Report Regularly

Errors in credit reports—such as incorrect personal details, old loans marked unpaid, or fraudulent accounts—are more common than you think. These can silently damage your credit score.

Fix:

• Check your credit report at least once every 6 months from CIBIL, Experian, or CRIF.
• Raise a dispute immediately if you find an error.
• Track your score to notice unusual drops quickly.

7. Having No Credit History

Surprisingly, having no loans or credit cards can also result in a low or "NA" credit score. Lenders can’t evaluate your repayment behavior, making them hesitant to offer credit.

Fix:

• Start with a secured credit card (against FD) to build your score.
• Take a small personal loan or a buy-now-pay-later EMI plan and repay on time.

8. Being a Joint Holder on a Poor Credit Account

If you're a co-applicant or guarantor on someone else’s loan or credit card, their defaults can affect your credit report too.

Fix:

• Only become a co-borrower if you trust the person financially.
• Monitor the repayment behavior on such joint accounts.
• Get your name removed once the loan is repaid or refinanced.

9. Ignoring Credit Mix

Having only one type of credit (like just personal loans) can affect your credit profile negatively. A healthy mix of secured (home/car loans) and unsecured credit (cards) boosts your creditworthiness.

Fix:

• Balance your credit mix with both short-term and long-term products.
• Don’t overborrow just to diversify; do it based on genuine needs.

10. Not Settling Disputed Dues

If you’ve disputed a charge or loan and ignore the bank's communications, it may still be reported as unpaid. This lowers your score even if you believe you're right.

Fix:

• Respond to disputes promptly and keep documentation.
• If needed, escalate the issue to the RBI Ombudsman or consumer forums.
• Ensure closure is confirmed in writing and reflected in your credit report.

Final Thoughts

Credit scores are crucial to your financial future. A good score can unlock better loan deals, lower EMIs, and greater financial freedom. The mistakes above are easy to make—but with awareness and discipline, they’re just as easy to fix. In 2025, take charge of your credit health and build a strong financial foundation for years to come.

FAQs

Q1: What is a good credit score in India?

A score of 750 and above is considered good and improves your chances of loan approval.

Q2: How long does it take to improve a credit score?

Depending on the issues, it can take 3 to 6 months to see improvement if you consistently follow healthy credit habits.

Q3: Can checking your own credit score hurt it?

No. Soft inquiries (like when you check your score) do not impact your credit score.