Credit Score: Can you have a low score without a loan? Know these details

There are a number of ways wherein a borrower can have a low credit score without having any loan to clear. For instance, if you have no credit history, the chances are that your credit score would be low. This is quite common among young professionals and college students who are yet to foray into the credit universe.

So, if you have never taken out a loan or used a credit card, you would barely have a credit history. This can result in a low or non-existent score. Additionally, if the only credit you have used is a credit card and you have missed payments or maxed out your limit, then your credit score could be low without any loans.

Credit scores are calculated based on several factors

Payment history: This indicates the history of payments. This shows whether you have paid your debts on time or not?

Total amount owed: How much credit are you using in relation to what is available. In other words, what is your credit utilisation ratio (CUR).

Length of credit history: One more factor that influences your credit score is the length of credit history i.e., for how long you have had your credit accounts.

Credit mix: Another important criteria is the healthy credit mix. In other words whether you have a variety of credit types such as credit cards and loans.

New credit: Another significant factor is whether you have applied for a fresh credit.

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 score. 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.