Having multiple loans impacts credit score: Here's why and what to do

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Taking several loans such as personal loans, home loans, automobile loans, or educational loans is gaining traction in India. However, every new loan increases your debt load, and this can be very damaging to your credit score. While credit agencies consider different types of credit as good, over-borrowing or default may ruin the picture in no time.

Lenders assess your creditworthiness on the basis of your CIBIL score and your credit report. A score greater than 750 is good. With each set of loan applications that you submit close together in time, lenders think that you are credit-hungry and lower your score. Each application is a hard enquiry of your credit file, and several such inquiries close together can harm your score.

Your credit score is primarily determined by your payment history. It is simple to manage multiple EMIs, but if the growth in your income is not balanced, you're at risk. One missed or delayed payment on a single loan makes a negative entry against your record and brings down your score. If you have multiple loans being repaid, reminders or auto-debiting will keep your record clean.

Another serious calculation lenders consider is your debt-to-income, or DTI, ratio. It is a ratio of your monthly total debt payments compared to your monthly income. The higher your DTI, the more of your income goes towards loan payments, which will discourage lenders from offering new credit. Keep your DTI at 40% or less to keep your credit healthy.

In order to retain or enhance your credit report, be certain to make timely EMIs. Utilize loan consolidation or refinancing to reduce your repayment burden. Avoid borrowing fresh funds except when absolutely necessary, and never neglect to include EMIs in the budget before taking new credit.

Having multiple loans is not negative in itself but bad management. The right credit score needs a controlled mind about oneself—timely payment, not exceeding means, and a sound debt-to-income ratio. In case of confusion, visit a financial planner before taking new debts.

Not really. As long as you service them on time, it actually works in your favour. But delayed payment or too many loans together can hurt your score.

There isn't really a number, but if your EMIs are more than 40–50% of your salary that takes home, then the lenders will consider you as over-leveraged.

Yes. Timely payments and in usual manner, low credit inquiries, and low credit usages can maintain the score even if you have multiple loans outstanding.