Reasons for a low credit score

These are some of the common reasons for a low credit score:

• Delayed repayments: Many people do not realize that even one or two delayed credit card payments can affect your credit score and cause it to drop. The more the number of delayed payments, the greater the negative impact on your credit history and credit score.
• Missed payments: Sometimes due to an unforeseen emergency, you may not be in a position to make your payments. For example, you might have unexpected medical expenses for a hospital stay, or you might lose your job, making it difficult for you to fulfil all your loan obligations. If you miss any payments, it will be recorded in your credit history and lead to a drop in your score.
• Lack of credit history:  If you have not borrowed for a loan or had a credit card account, you will not have much of a credit history. This too can lead to a low credit score.
• Administrative error: Occasionally, there may be an administrative error that results in wrong information being recorded on your credit report. Sometimes, this might be the result of fraudulent activity as well. For no fault of yours, these errors could lead to a lower credit score, signalling to future lenders that you have bad credit.

  In general, it is advisable to have a credit score of 750 or above to be in good credit standing with banks and other lenders. Anything under 750 is viewed negatively by lenders who are reluctant to approve your loan. It is important to improve your score to at least 750 so that your loan application is not automatically rejected during the initial application process.