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Today, we use UPI for every payment—whether big or small. Be it buying a juice worth ₹20 or purchasing a phone worth ₹20,000, we rely on UPI for every transaction. Consequently, the question often arises: Does using UPI for payments have any impact on one's credit score or loan eligibility?

**Does It Affect Your Credit Score?**
According to media reports, while UPI payments do not have a direct impact on one's credit score, they can certainly influence one's eligibility for a loan. First, let's briefly understand what a credit score is. A credit score allows banks to assess a borrower's capacity to repay a loan.

If your credit score is high, obtaining a loan becomes much easier; banks may even offer loans at lower interest rates. Conversely, if your score is low, you may face difficulties in securing a loan. Now, a credit score is primarily determined by how consistently and responsibly we make payments toward our credit cards and, if applicable, our loan EMIs.

Since transactions made via UPI do not directly affect one's credit score, how, then, do they influence loan eligibility?

**The Impact on Loans**
It is important to note that when granting a loan, banks do not rely solely on a credit score. They also scrutinize an applicant's income, sources of income, and credit history. Through your credit history, banks analyze your spending patterns. They also track your total monthly expenditure—regardless of whether it was made via UPI or any other payment method.

Ultimately, the specific medium used for a payment does not matter to the bank; what they focus on is the underlying spending pattern—specifically, whether the individual tends to be a spendthrift or exercises financial prudence.

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