Why Did Your CIBIL Score Drop Suddenly? 7 Common Reasons & Fixes

A sudden drop in your CIBIL score can be stressful, especially when you believe you haven't done anything wrong. The truth is, many score drops happen due to hidden or technical factors that most people don't notice.

Understanding the cause is the first step to fixing it. Here are the 7 most common reasons why your CIBIL score might have dropped and what you can do about it.

1. A Missed EMI or Credit Card Payment

This is the single most common and impactful reason. Even one missed payment results in a DPD (Days Past Due) entry on your report, which can drop your score by 40 to 80 points overnight.

• The Fix: Pay the entire overdue amount immediately. The DPD will still be on your report, but its negative impact will lessen over time. Your score will start to recover after 2-3 months of consistent, on-time payments.

2. High Credit Card Utilization

If you use a large portion of your credit card limit, it signals to lenders that you are under financial stress.

• Example: If your credit card limit is ₹1,00,000 and your outstanding balance is ₹80,000, your Credit Utilization Ratio (CUR) is 80%.
• The Fix: Keep your CUR below 30%. If you need to make a large purchase, consider paying back a portion of it before your statement is generated to keep the utilization low.

3. Incorrect Reporting by Your Bank or NBFC

Mistakes happen. Lenders sometimes report incorrect data to CIBIL, which can unfairly penalize you.

• Common Errors: A timely payment marked as late, a closed loan still showing as active, or an incorrect overdue amount.
• The Fix: Download your CIBIL report and check it for errors. If you find one, immediately raise a dispute with both the lender and CIBIL, providing proof of your claim (e.g., payment receipts).

4. Multiple Loan or Credit Card Applications

Every time you apply for a new loan or credit card, the lender performs a "Hard Enquiry." Too many hard enquiries in a short period suggest "credit-hungry" behavior and can lower your score.

• The Fix: Avoid applying for multiple credit products at once. Space out your applications by at least 3-4 months. Before applying, use online eligibility calculators that perform a soft enquiry.

5. Closing an Old Credit Card Account

Your "Age of Credit History" contributes to your score. Closing your oldest credit card account can shorten your credit history's average age, causing a score drop.

• The Fix: Keep your oldest credit card account open and active, even if you only use it for small, infrequent purchases.

6. A "Settled" or "Written-Off" Status Update

If you have previously settled a loan, it remains a negative point. Sometimes, banks update an old overdue account to "Written-Off," which is extremely damaging.

• The Fix: If you have a settled or written-off account, the only way to fix it is to pay the dues in full and get a No Objection Certificate (NOC) from the lender. Then, ensure they update the status to "Closed."

7. Fraudulent Activity

It's possible that someone has fraudulently used your identity to apply for credit.

• The Fix: Regularly review your credit report for any accounts or enquiries you don't recognize. If you spot any suspicious activity, report it to the lender and file a dispute with CIBIL immediately.

The Final Takeaway

A sudden drop in your CIBIL score always has a reason. By regularly monitoring your credit report, you can quickly identify the cause and take corrective action.

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If you need a professional review of your credit report to identify the exact cause of your score drop, we can help.

Contact us for a free analysis: Call / WhatsApp at +91 82902 64071