CIBIL Score: These 5 red flags signal 'credit hunger'! If you don't improve in time, banks will blacklist you..

If taking out loans or credit cards has become a part of your financial planning, be cautious. Banks and credit agencies classify such individuals as "credit hungry," which damages their CIBIL score and credit image. This can not only lead to future loan rejections, but banks may also consider you a high-risk consumer.

What is "credit hunger"?
"Credit hunger" is a condition in which a person continually applies for loans, credit cards, or personal loans. Banks consider this a sign that the person is constantly in need of money and is unable to control their expenses. In such a situation, banks categorize them as risky consumers.

For example, if you apply for a loan or card five times in three months, each time an "inquiry" is recorded in your CIBIL report. This gradually damages your score.

1. Frequent Loan Applications – The Biggest Danger
If you're trying to get a new loan or card every month, banks will assume you're credit hungry. Each application adds a 'hard inquiry' to your report, causing a 10-15 point drop in your score. This drop can gradually drag your score below 750, making it difficult to obtain a new loan from any bank.

2. Frequent Credit Limit Use
If you're using 80-90% or more of your card limit every month, banks consider this a negative sign. This means your expenses exceed your income.

Credit card usage should not exceed 30%. For example, if your limit is ₹1 lakh, spend only up to ₹30,000. This reflects your financial stability on your CIBIL report.

3. Running Multiple Cards and Loans Simultaneously
Having multiple cards or loans simultaneously is another red flag in the eyes of banks. This increases your risk of repayment default. If you have 3-4 cards and EMIs are pending on all of them, banks feel your liquidity is at risk. Consequently, they may think twice before granting another loan.

4. Repeated EMI Delays
If you're not paying EMIs on time, banks may consider you a credit-hungry individual or a defaulter. Even a mere 30-day delay negatively impacts your CIBIL report. Therefore, banks may immediately reject your loan application the next time you apply.

5. The Temptation of Higher Loan Offers
Many banks or fintech apps offer pre-approved loans or cards. But accepting every offer weakens your financial health. Such people are considered "over-leveraged" by the bank. This increases your debt-to-income ratio (DTI), which is a risk factor.

How banks identify "credit hungry" customers
Banks determine whether you are credit hungry by looking at the "inquiry section," "credit utilization ratio," and "repayment history" in your CIBIL report. If you repeatedly see "hard inquiries" and a utilization ratio of more than 50%, banks may consider your application "high risk."

How to avoid the "credit hungry" tag
Avoid repeatedly applying for loans or cards.
Take loans only when necessary.
Do not use more than 30% of your credit card limit.
Take a new loan only after repaying the old one.

Pay all EMIs on time and avoid overdrafts.

How it affects your CIBIL score
If you are considered credit hungry, your CIBIL score may drop below 700. Banks may even classify you as "low creditworthy," which could lead to future problems like loan rejections, higher interest rates, and security requirements.

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