Credit Score: Here’s why you have a low credit score without even taking a loan? | Mint

It could be frustrating to have a low credit score without ever taking a loan, but there are multiple reasons for this to happen, particularly if you are new to credit or have not actively used credit products.

Here’s why your score might be low:

Reasons for a low credit score without any loan

I. No credit history: If you have never taken out a loan or credit card, credit bureaus such as CRIF High Mark would – in all likelihood – have no data to assess your credit score. This could be common among youngsters such as students or those who always pay via cash or debit card.

II. Inactive credit card: If you have a credit card but never use it, the credit bureaus can’t assess how you manage credit. Inactivity can be treated the same as having no credit history.

III. Credit inquiries: If you have applied for a credit card which was declined, that inquiry will show up on your report, and would bring down your score, albeit temporarily.

IV. Low credit age: Credit score algorithms prefer older credit histories. As a result, if your first credit product is recent, your score will be low at first.

V. Errors in credit report: There could be occasions where wrong information like another person’s loan or late payment gets added to your report by mistake.

VI. Lack of credit mix: Credit bureaus prefer a mix of credit types such as credit cards, personal loan, etc. Only having one type of credit may make your score lower.

VII. High CUR: If you have a credit card and use more than 30 per cent of your limit frequently, your score will drop, even if you pay the bill on time.

VIII. Joint accounts: If you are a co-signer or guarantor for someone else’s loan and they default, your credit score will take a hit.