10 Common Credit Mistakes to Avoid in 2025

Your CIBIL score or credit score is the backbone of your financial health, especially when applying for financial products such as a personal loan.

However, many individuals unknowingly make mistakes that can negatively impact their financial health and creditworthiness.

From ignoring mistakes in credit reports to mismanaging your credit utilisation, these pitfalls can lead to loan rejections or higher interest rates.

Let’s explore the top 10 common credit mistakes you should steer clear of to maintain a healthy financial profile. 

1. Overlooking Errors in Credit Report

As a detailed record of your credit history, even a small mistake on your credit report can harm your score. Errors such as incorrect personal details, duplicate accounts, or wrongly reported late payments are common culprits. Regularly review your report and dispute any inaccuracies to ensure it remains accurate.

2. Delaying Credit Card or Loan Payments

Late payments are one of the most common credit mistakes. Missing due dates not only attracts penalties but also adversely affects your credit rating. Even a single late payment can remain on your report for up to seven years, impacting your ability to secure future loans. Set reminders or enable auto-pay to avoid missing payments. Timely repayments are crucial for maintaining a good CIBIL score for personal loans and demonstrating financial discipline to lenders.

3. Opting for Minimum Payments on Credit Cards

Paying only the minimum amount due may seem convenient, but it can lead to mounting debt and high-interest charges. This habit can also signal financial instability to lenders, affecting your creditworthiness. Over time, the accumulating interest on your remaining balance can make it increasingly difficult to pay off your debt.

4. Applying for Multiple Credit Lines Simultaneously

Each credit application triggers a hard enquiry. Multiple enquiries within a short time frame can lower your CIBIL score and make you appear riskier to lenders. Space out your applications and only apply for credit when absolutely necessary.

5. Overusing Your Credit Limit

While having access to credit is beneficial, excessive utilisation can be risky. Generally, using more than 30% of your credit limit can lower your score, as lenders view high utilisation as a sign of financial strain. Manage your credit responsibly by keeping your usage low and, if possible, paying off balances in full each month.

6. Closing Old Credit Card Accounts

Although it might seem prudent to close unused credit accounts, doing so can reduce the length of your credit history and increase your overall credit utilisation ratio. A longer credit history demonstrates your ability to manage credit over time, which is favourable to lenders. Instead of closing these accounts, keep them open and use them occasionally to maintain a healthy credit record.

7. Failing to Diversify Your Credit Portfolio

A robust credit profile often includes a mix of secured (e.g., auto loans) and unsecured (e.g., personal loans) credit. Relying solely on one type of credit can limit your creditworthiness. Diversifying your portfolio shows lenders that you can handle various types of credit responsibly. However, be sure to assess your needs and repayment capacity to avoid taking on unnecessary debt.

8. Co-Signing Loans Without Proper Evaluation

Co-signing a loan makes you equally responsible for its repayment. If the primary borrower defaults, your credit score can suffer. Always evaluate the borrower’s financial stability before agreeing to co-sign, and ensure you’re prepared to cover the payments if necessary. While co-signing can be a generous gesture, it carries significant responsibilities and risks.

9. Neglecting Regular CIBIL Score Checks

Many people make the common credit mistake of not checking their CIBIL scores and reports. Monitoring regularly helps you identify and rectify any incorrect information on your credit report early. Regularly checking credit score also allow you to track your progress and make informed financial decisions.

10. Forgetting to Update Creditors After a Name Change

If you’ve changed your name due to marriage, divorce, or other reasons, failing to update your creditors can lead to discrepancies in your credit report. Ensure all your accounts reflect your current name to avoid challenges due to CIBIL score mistakes. Inconsistent information can cause delays in loan approvals and create unnecessary complications.

Conclusion 

Avoiding these common credit mistakes is essential for maintaining a strong CIBIL score and improving your eligibility for financial products like personal loans. 

At SMFG India Credit, eligible applicants with a CIBIL score of 750 or above can access personal loans of up to INR 30 lakhs* at attractive interest rates. Use our personal loan EMI calculator to estimate your monthly payments and apply online today!