Credit Score: Know how loans and credit cards affect your credit score...
After taking a loan, it is very important to repay it on time. Repaying the loan on time is one of the primary tasks. In such a situation, many people are busy repaying the loan quickly. If he has taken a home loan or car loan, then he thinks of repaying it as soon as possible by using pre-payment. They do not know that it directly affects their credit score.
If you repay the loan prematurely or close the credit card after settling the balance, your credit score may fall.
Impact on credit score
Credit score gets spoiled due to many reasons. If you settle the loan prematurely, it also has a negative impact on your credit score. In such a situation, you should know how your credit score is calculated. Apart from this, if the credit score gets damaged then how can you fix it?
To correct the credit score, many things like payment history, credit utilization, credit history, and credit mix are important. If you keep paying credit card or loan EMIs on time, it corrects your payment history, which also improves your credit score.
At the same time, if you repay the loan before time or close it on the credit card, then this credit utilization ratio increases. An increase in the credit utilization ratio also has a negative impact on the credit score.
Decreasing credit history also spoils the credit score. The variety of credit types also gets spoiled due to premature repayment of loans. To improve the credit score, experts also advise to repay the loan on time.
PC Social media