5 common credit score myths hurting your loan approval chances

Many borrowers in the country still misunderstand how credit scores work. This leads to doubts and myths that may silently influence their chances of seamless loan approvals.

A commonly prevalent myth is that high income guarantees a positive credit score still, it is important to keep in mind that bureaus also consider credit mix, repayment history, credit utilisation and overall profile.

Another myth is, checking your own credit score lowers it. Truth is different, self checks are simply soft inquiries and have no impact. Only repeated lender checks i.e., hard inquiries can result in a brief dip in an individual’s credit score.

Adding to the same, Manish Shara, Co-founder and CEO, ZET says, “Many still believe checking your credit score hurts it or closing old cards boosts it—both are myths. Soft inquiries don’t impact your score, and older accounts build history. What matters is timely EMIs, low credit use, few hard inquiries, and smart tools like FD-backed cards to build a strong repayment record for future credit.”

How credit myths can delay or deny loans

1. Myth: Closing old credit cards is good for your credit score.
   Fact: Closing old cards shortens your credit history and raises your utilisation ratio, both of which can lower your score.
2. Myth: Paying off a personal loan instantly boosts your credit score.
   Fact: While reducing debt helps, lenders value consistent and timely repayments over time, not just early closures.
3. Myth: Having no credit history means you’re financially responsible.
   Fact: No credit history gives lenders nothing to assess your repayment behaviour, making approvals more difficult.
4. Myth: One missed EMI doesn’t make much difference.
   Fact: Even a single missed payment can remain on your credit report for years and significantly hurt your score.
5. Myth: A single bureau score is all lenders look at.
   Fact: Banks access scores from multiple credit bureaus, depending on their partnerships.

Why do bursting these myths matter?

Today, digital lenders generally have a mechanism to auto reject loan applications below a certain credit score, sometimes without any human review. That is why busting credit score myths is crucial, as they can lead to delays, rejections, higher interest rates, or tough repayment terms.

Recent regulatory reforms have boosted transparency. Borrowers now receive SMS or email alerts when their credit report is checked. Credit reports are updated twice a month, and lenders must disclose reasons for loan rejections. These regulations help borrowers track, fix, and improve their credit profiles.

5 smart credit habits to improve eligibility

• Ensure that you pay EMIs and credit card bills on time.
• Focus on keeping your credit utilisation under 30%.
• Try to maintain your old credit accounts for as long as possible.
• Never panic for availing loans and avoid multiple applications at once.
• Regularly check reports for errors, mistakes or wrong entries and dispute them.
   

Hence, understanding how credit scores truly work and ignoring common mistakes and myths can empower your financial journey. A high credit score boosts chances of approval and unlocks better loan terms, interest rates and future opportunities.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.