10 surprising factors that don’t impact your credit score | Mint

An individual’s credit score is mainly affected by factors like timely EMI and credit card bill payments, credit utilisation ratio, secured and unsecured credit mix, number of credit applications and their frequency, ageing of loans and credit cards, etc. There are a lot of myths and misconceptions about some other factors that some people believe affect their credit score. However, these factors don’t affect the credit score. Some of these factors that don’t affect your credit score include the following.

You checking your credit score regularly

You can check your credit score regularly or any number of times. It will not affect your credit score. Your credit score gets affected only when you apply for a credit card or personal loan, and the financial institution makes a hard inquiry. The financial institution accesses your credit score and credit report.

You should check your credit score and report regularly. It will help you stay updated with your loans/credit cards, their outstanding balances, the repayment track record, etc. It can help you identify any incorrect data or fraudulent transactions and take steps to rectify them. So, go ahead and check your credit score and report regularly, as it will not affect your credit score at all.

Soft inquiries by banks or NBFCs

You must have often received SMSes and emails with pre-approved offers from banks for credit cards and loans. To assess whether you are eligible for the pre-approved credit card or loan offer, the bank does a soft inquiry on your credit report.

A soft inquiry doesn’t affect your credit score. The bank will not seek your consent for doing the soft inquiry. It is also known as a soft credit score check or soft pull.

Cheque stop payment or cheque bounce

When you issue a cheque to someone and don’t want your bank to make the payment when the cheque is presented for clearing, you can do a cheque stop payment. When you do a cheque stop payment or an issued cheque is dishonoured (bounce), it doesn’t affect your credit score.

The exception to the above is a cheque for EMI or credit card bill payment getting dishonoured. Post the cheque dishonour, if the EMI or credit card bill payment is not made before or by the due date, it will affect your credit score negatively.

Making payments with debit cards

Making payments with debit cards for various transactions will not affect your credit score. Debit cards are not a credit instrument. When you use your debit card, the payment goes from your bank account directly. There is no borrowing involved.

Hence, when you make payments with debit cards, it will not contribute towards improving your credit score. The number of times you use your debit card, the amount you pay with it, the debit card utilisation ratio, etc., don’t affect your credit score.

Connecting with a credit counsellor for any help

If you are facing any challenges in managing your debt or want to improve the way you manage your debt, feel free to talk to a credit counsellor. It will not affect your credit score, irrespective of the number of credit counselors you consult, the number of counseling sessions you take, etc. In fact, connecting with a credit counsellor will help you manage your debt better or become debt-free, which is good for your financial health and much-needed peace of mind.

Any increase in interest rate on your floating interest rate loans

In a high inflation scenario, the RBI hikes interest rates. The banks follow the RBI and pass on the increase in the cost of funds by hiking interest rates on loans. If you have a floating-rate home loan, its interest rate will increase. However, the increase in the interest rate on your floating-rate home loan will not impact your credit score in any way.

The interest rate increase and the resultant increase in EMI can put an additional financial burden on the borrower. If the borrower is not able to pay the increased EMI on time, it will impact their credit score negatively.

Your savings account becoming inoperative

As per RBI guidelines, if there are no customer-induced transactions in a savings bank account for a period of over two years, the account will be classified as inoperative. However, a savings account becoming inoperative or dormant will have no impact on your credit score.

Once a savings account becomes inoperative, there are restrictions on the transactions that can be performed. To do regular transactions in the account, the customer has to submit an application to the bank to make the account active. Just like the savings account becoming inoperative doesn’t impact your credit score, making the account active also doesn’t impact your credit score.

You getting married or divorced

Whether you get married or divorced doesn’t impact your credit score in any way. Your marital status is not a factor in the calculation of your credit score. Even after marriage, your credit score will stay independent from your spouse’s credit score. If your spouse delays or defaults any EMI or credit card bill payment, it will impact their credit score and not your credit score.

Your demographics

Your demographics, like age, sex, employment, address, city of residence, etc., don’t play any role in the calculation of your credit score. Even when there is a change in your demographics, like age, marital status, job change, location, etc., it will not have any impact on your credit score.

A change in your income will not impact your credit score. So, an increase in income will not increase your credit score, nor will a decrease in income pull down your credit score.

Loan defaults by family members

If any of your family members defaults on a loan EMI payment or credit card bill payment, it will not affect your credit score. The exception to this is a loan where you are a co-applicant or a guarantor. In such a scenario, the default will hit your credit score negatively.

Now you understand well which factors don’t affect your credit score and which ones do. Hence, you should ignore the ones that don’t affect your credit score. You should focus only on those factors that affect your credit score so that you can improve your credit score. A good credit score of 750 and above can help you get your loan application approved. A high credit score of 800 and above can help you get a loan on better terms with some banks.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.