Reasons Your CIBIL Score Can Drop Even If You Make Timely Credit Card Bill Payments


Since credit scores are one of the most important indicators of eligibility for credit cards and loans and the foundation of risk-based pricing models, they are vital to our financial lives. Since it is thought that your credit repayment history will have the biggest influence on your credit score, giving due consideration to other important factors or financial decisions that may have an impact on your credit score frequently comes in lower on our list of priorities.

Even if you regularly and on time pay off your loan installments and credit card debt, the following six financial decisions could negatively impact your credit score, which would be visible when you do SBI CIBIL score check:

Not keeping credit utilisation under 30 percent

This ratio shows the percentage of your credit limit that is available to you divided by the total amount of credit card debt that you currently owe. Additionally, credit bureaus usually take a few points off your credit score if your credit utilisation ratio is higher than 30%. Lenders often view this as evidence of a credit-hungry applicant.

As a result, it is suggested that you restrict the amount of money you spend with your credit card to no more than 30% of the entire authorised amount. You might want to apply for a second credit card or ask your card issuer to raise your credit limit if you often find yourself exceeding your credit limit. If you don’t use your card more because of the higher credit limit, this will result in a lower credit utilisation ratio and a higher total credit limit. You can do SBICIBIL score check next month or two to see changes in your score.

Requesting credit multiple times in a brief period of time

The credit reporting agencies will provide your credit report to the lender when you apply for a credit card or loan, and the lender will use it to determine your creditworthiness. Known as “hard inquiries,” these lender-initiated credit report inquiries typically result in a few points being deducted from your credit score.

Furthermore, you could quicken the deceleration of your credit score by contacting lenders with several direct credit inquiries in a short period of time. This will make it more difficult for you to get credit approved and will prevent you from being eligible for loans in the future. swiftly lower his credit rating

Rather than sending multiple credit inquiries to different lenders directly, think about using online financial portals to select the best lender and credit option based on your income, credit score, and any other relevant factors. These marketplaces’ requests for your credit report, even though they are what credit agencies call “soft inquiries,” don’t affect your credit score.

A rise in the overall proportion of unsecured loans

The ratio of secured to unsecured debt is known as your credit mix. Due to the fact that lenders usually give preference to borrowers with a higher percentage of secured loans, such as home loans, auto loans, and loans secured by property, credit bureaus also rate borrowers favourably on their credit reports. To see improvement in score when you conduct CIBIL check free next time, people who have a larger proportion of unsecured debt—credit card debt, personal loans, and the like—should try to keep their debt-to-credit ratio more balanced. Either paying off your current unsecured debt early or taking out new secured loans (like a home loan top-up for current borrowers) are the two ways you can achieve this. As an alternative, you can obtain a loan secured by stocks, a loan for gold, or another kind of borrowing.

Failing to keep track of a guaranteed or co-signed loan’s return

Guaranteeing or cosigning a loan carries responsibilities, much like credit card add-ons. You take on joint and several liability for making sure a loan is repaid on time when you co-sign or guarantee it. The same would apply to any late or nonpayment of that debt in terms of your credit score. Therefore, keep a careful eye on the repayment activities of your guaranteed or co-signed loan accounts to ensure that payments are made on schedule and to prevent your credit score from being negatively impacted by the primary borrower’s careless financial behaviour. Careless behaviour of co-borrower will hurt your score surely which you could witness when you perform SBICIBIL score check.

Mistakes found in the credit report

The credit bureau uses data about your credit history provided by credit card and lender companies to calculate your credit score. Any error or dishonesty on the part of your lender or credit bureau, or even worse, fraud, could have an effect on your credit score which would be visible when you do CIBIL check free online. As a result, you should try to get your credit report once a month at the very least. This would make it easier to find any differences and allow you to report them to the lender and credit bureau quickly, which would speed up the process of getting the problem resolved. Every consumer may request a free credit report from any of the four credit bureaus once a year, subject to certain restrictions. Alternatively, consumers can visit online financial marketplaces to obtain free credit reports and monthly updates.

Getting rid of old credit cards

The average length of your credit history, also known as the age of your credit history, is one of the most important factors that credit bureaus consider when calculating your credit score. Credit card users should hang onto their older credit cards in order to maintain their average length of credit history, which is significant because lenders favour applicants with longer average credit histories. Your credit history should preferably have a longer average length. Your credit history should preferably have a longer average length. Your credit score is negatively impacted by closing an older credit card because it decreases both the total credit limit and the average age of your credit history. Your credit use ratio goes up as a result.

In this sense, it makes sense to keep your older credit card, and if you must close any of your numerous credit cards, attempt to close the ones that are relatively newer.

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