Are you hurting your credit score despite paying EMIs on time?

Many borrowers believe that as long as they pay EMIs and credit card dues on time, their credit score will remain strong. However, credit experts say modern credit evaluation systems track far more than repayment behaviour alone.

Today, lenders closely monitor credit utilisation, borrowing patterns, loan dependency, account history, and even the accuracy of personal details in credit reports. As a result, several commonly ignored financial habits can silently drag down credit scores despite a spotless repayment record.

Minimum due trap

One of the biggest mistakes borrowers make is paying only the “minimum due” on credit cards. While this avoids late payment penalties, the remaining unpaid amount continues to accumulate interest and keeps the balance revolving.

This significantly increases the credit utilisation ratio — the percentage of total credit limit being used — which directly impacts credit scores. Experts generally recommend keeping credit utilisation below 30%.

Similarly, consistently maxing out credit cards or using more than 30% to 40% of the available limit can hurt creditworthiness, even when payments are made on time.

BNPL platforms

The growing popularity of Buy-Now-Pay-Later (BNPL) services has introduced another hidden risk. Many consumers use multiple BNPL apps simultaneously for shopping, gadgets, travel, or lifestyle expenses.

Experts warn that excessive BNPL usage may resemble “loan stacking” to lenders and credit bureaus, signalling rising dependence on short-term unsecured borrowing.

While individual BNPL transactions may appear harmless, multiple active accounts can create the impression of financial stress or overleveraging.

Closing old credit cards can reduce scores

Another overlooked mistake is shutting down old credit cards, particularly lifetime free cards with long repayment histories.
Closing old cards shortens the average age of credit history and instantly reduces total available credit. Both factors can negatively affect credit scores, especially for borrowers with limited credit history.

Experts often advise consumers to keep older cards active with minimal usage rather than closing them entirely.

Co-signing loans and opting for settlement

Borrowers are also advised to be cautious before becoming guarantors or co-signers for friends or relatives. A co-signer is equally responsible for repayments, meaning any missed EMI or default by the primary borrower can damage both credit profiles.

Another major red flag is opting for “settlement” instead of proper loan closure. If a lender agrees to accept less than the total outstanding amount, the account gets marked as “settled” rather than “closed.”

This status can remain on credit reports for years and significantly reduce future chances of getting loans or premium credit cards.

Even demographic errors

Experts also caution borrowers against ignoring errors in credit reports. Incorrect PAN details, addresses, phone numbers, or identity mismatches can create “mixed files,” where another person’s loan or default gets incorrectly linked to someone else’s profile.

Subhankar Mishra, Interim MD for Equifax Credit Information, said borrowers must actively monitor their financial footprint beyond just timely payments.

“Financial discipline is no longer just about paying your EMIs on time; it requires active credit ownership. As the industry shifts toward near real-time data reporting, borrowers must remain vigilant about every aspect of their financial footprint. This includes scrutinising your credit report for seemingly harmless demographic errors, which can mistakenly tag someone else’s liabilities to your profile. Protecting your score means protecting the fundamental accuracy of your financial identity,” Mishra said.

With lenders increasingly relying on automated credit assessment systems, experts say hidden financial habits can significantly influence future borrowing costs, loan approvals, and overall financial credibility.