Why Your CIBIL Score Drops: Common Mistakes to Avoid

Last Updated : June 3, 2025, 5:14 p.m.

Maintaining a high CIBIL score is crucial for securing loans, credit cards , and favorable interest rates. However, even financially responsible individuals may witness sudden CIBIL score drops in their scores. Understanding the reasons behind these declines can help you take corrective actions promptly.

Why does your CIBIL score drop?

Common reasons include missed EMI payments, high credit utilization, closing old credit cards, multiple loan applications, and errors in your credit report. Regularly monitoring your credit behavior and avoiding these pitfalls can help maintain a healthy CIBIL score.

Common Mistakes Leading to CIBIL Score Drops

1. Missing EMI or Credit Card Payments

Timely payments constitute 35% of your credit score. Even a single missed payment can significantly impact your score.

Avoid this : Set up auto-debit mandates or payment reminders to ensure on-time payments.

Learn more : How to Improve Your CIBIL score?

2. High Credit Utilization Ratio

If you’re wondering why your CIBIL score goes down after using your card, this is a top reason. Depleting more than 30% of your credit limit shows high dependency on credit or credit hungry behavior. This can lead to CIBIL score drops.

Avoid this : Aim to keep your credit utilization below 30%. Consider increasing your credit limit or distributing expenses across multiple cards.

3. Multiple Loan or Credit Card Applications

Each application triggers a hard inquiry, reducing your score temporarily. Frequent applications can show you as credit-hungry and result in CIBIL score drops if not managed carefully .

Avoid this : Apply for credit only when necessary and space out applications by at least 3-6 months.

4. Closing Old Credit Cards

Does closing a credit card reduce your CIBIL score? Yes, especially older ones. Closing long-standing credit cards reduces your credit history length and available credit, negatively affecting your score.

Avoid this : Keep older cards active with occasional small transactions and timely repayments.

5. Errors in Credit Report

One of the most overlooked reasons behind CIBIL score drops is not reviewing your report regularly. Inaccuracies like incorrect loan statuses or duplicate accounts can unjustly lower your score.

Avoid this : Regularly review your credit report and dispute any discrepancies promptly.

Learn more : How Monthly CIBIL Score Monitoring Improves Loan Approval Chances.

6. Settling a Loan Instead of Paying in Full

Settling loans for less than the owed amount marks you as a risky borrower, impacting your score.

Avoid this : Negotiate revised payment terms with lenders instead of opting for settlements.

Instead of settling a loan, consider applying for a personal loan with flexible repayment terms to pay off existing dues and safeguard your CIBIL score.

7. Not Having a Credit Mix

A lack of varied credit types (secured and unsecured) can contribute to CIBIL score drops.

Avoid this : Maintain a balanced credit portfolio, combining different credit types responsibly.

Learn more: Importance of credit mix on credit score

8. Frequently Reaching Credit Limits

What hurts your CIBIL score most? Maxed credit limits rank high. Even if you don’t max out your cards, consistently nearing your credit limit each month signals financial stress to lenders. It can impact your score over time.

Avoid this: Aim to use only 20-30% of your available credit limit and pay off balances in full monthly.

9. Delays in Updating Paid-Off Loans

Once a loan is paid off, it must be marked as "closed" in your credit report. Delays from lenders in updating this can continue to affect your score. To fix a low CIBIL score fast , ensure your paid loans are reflected correctly.

Avoid this: After closing a loan, request a No Dues Certificate and follow up with the lender to ensure the report is updated.

10. Not Using Credit at All

Wondering why your CIBIL score is low even if you never borrowed ? This could be why. Surprisingly, not using credit can also harm your score. Inactivity leads to insufficient data for evaluation.

Avoid this: Use your credit card for small, regular purchases and repay promptly to maintain activity on your credit profile.

11. Joint Accounts and Co-signed Loans

If you’re a co-applicant on a loan or hold a joint account, missed payments by the other party can also affect your score. You share responsibility for repayment, and any negative activity reflects on both profiles.

Avoid this: Monitor joint accounts regularly and ensure your co-borrower maintains discipline in repayments.

How to Fix a Low CIBIL Score Quickly?

• Timely Payments : Make sure that all your outstanding dues are paid on time.
• Reduce Outstanding Balances : Aim to lower your existing debts.
• Limit New Credit Applications : Apply for new credit sparingly.
• Regular Credit Report Checks : Monitor your credit report monthly for inaccuracies.
• Maintain a Healthy Credit Mix : Combine various credit types responsible.
• Keep Credit Accounts Active : Inactive accounts may be closed by lenders.
• Stay Alert on Joint Accounts : Communicate openly with co-borrowers.
• Verify your free credit report : Do a Free CIBIL Score Check on Wishfin.

Conclusion

Understanding the reasons behind CIBIL score drops empowers you to take proactive and corrective measures. By avoiding common mistakes and adopting responsible credit behavior, you can not only recover from a low CIBIL score but also build a stronger, healthier credit profile over time. Regular monitoring and timely interventions are key to long-term creditworthiness.