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A drop in your credit score can sometimes be surprising, especially when you pay your bills on time, use your credit card wisely, and avoid risky loans. Yet, your score still drops slightly every few months.  Most people only realize this when their loan application is rejected or the interest rate seems higher than expected.

In reality, your credit score is a constantly changing reflection of your daily financial habits. Often, the reason for a score drop isn't a major mistake, but rather small habits, overlooked details, and poor timing. The good news is that once you understand why your score is changing, you gain control.  Knowing the cause makes it easier to correct the problem. So, let's understand which mistakes silently ruin your CIBIL score even when everything seems fine.

High Credit Utilization

Many people think that paying only the minimum due is enough.
The truth is, using a large portion of your available credit limit is the fastest way to lower your score.

If your card is consistently running at 60-80% of its limit, even if you pay on time, the system considers it a sign of financial stress.
Increased spending during festivals or sales is normal, but the problem arises when the balance remains high for an extended period.

Ideally, as soon as your utilization drops below 30% and stays there, you'll see an improvement in your score.

Even a slight delay in payment leaves a lasting impact.
Many borrowers think that a few days' delay in EMI payment is not a big deal, but credit bureaus don't see it that way.

Even a few days' late payment can remain on your record for months, even years.

The score doesn't drop because you missed one installment, but because the system considers you a borrower who might default again.

You can easily avoid such mistakes by setting up auto-debit or mobile reminders. Applying for multiple loan applications in a short time
Every time you apply for a loan, the bank conducts a "hard inquiry."
One or two inquiries a year don't make a difference, but multiple applications in the same month signal distress to the system.

The problem is that people apply to multiple places, hoping for approval, which only worsens the situation.

It's best to compare options first and then apply to only one or two.

Closing old credit accounts without a plan
To simplify their finances, people close old or unused credit cards.
They don't realize that this reduces their total credit limit.
It also automatically increases the utilization percentage on their remaining cards, which can cause their score to drop.
In reality, old accounts demonstrate your long and positive payment history.
So closing them shortens your credit history, negatively impacting your score.

Having heavy existing loans and adding new debt
Having more than one loan isn't wrong. But banks look at the ratio of your total EMIs to your income.
If new debt is added before old loans are properly settled, the report appears overloaded.
The reason for a falling score isn't borrowing itself, but rather increasing responsibility and slow repayment.

There can also be errors in your credit report
Not every drop in your score is your fault. Sometimes a closed loan isn't updated, an incorrect PAN is linked, or an unknown account appears.

Checking your credit report once or twice a year helps catch such discrepancies early.  Filing a complaint at the right time can gradually improve your score.
A falling score isn't a crisis, but a signal.

A credit score is like a heartbeat; it improves with good habits, drops under pressure, and stabilizes with improvement. So instead of constantly worrying about the number, focus on habits like timely payments, low utilization, limited loan applications, and maintaining a long credit history.

The most reassuring thing is that a credit score does recover, slowly, steadily, and reliably. Yes, your credit score is simply a reflection of your financial health. So, if it has dropped, some improvements are needed, and as soon as those improvements are made, it will show a clear recovery.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.