Consistently Paying Your Bill but Still Credit Score Showing a Drop? These Could Be The Reasons!

The moment we get a hold of our first credit card, we have been told to pay our bills on time. So, one can imagine the disappointment one faces by seeing a drop in their credit score when they do CIBIL score calculation even after paying their EMIs and other dues on time. Seeing a drop in your CIBIL score by pan card is never a good feeling. Don’t worry, you’re not the only one in this situation. Many borrowers panic when they first notice a low credit score, even though they have been diligently paying all payments on time to keep their credit score at the top. You must understand that a drop in your credit score can be caused by a variety of factors. It is not necessarily a missed or late payment. We have compiled a list of explanations that may assist you in understanding why your credit score has dropped and how you may handle each of them.

1. Used a lot more credit than usual: At the time of CIBIL score calculation, your credit utilization rate is always taken into account. If you get a credit card, everyone will instruct you how to spend the available balance wisely and make timely payments. But no one tells you how much you should spend or what ratio you should keep. Do you know 30% of your credit score is determined by your credit utilization ratio? It is advisable that credit should be used in proportion to your income. When you make a large purchase in a single month, your income-to-credit ratio is disrupted, which may cause your credit rating to go down. It has been stated that using only 30% of your credit card’s available balance should be used for a consistent CIBIL score by pan card. For example, suppose your credit card limit is Rs. 50,000. In that situation, you should not spend more than 30% of the monthly limit, which is Rs. 15,000, in a month.
2. Applying for a new credit card within a short period: When a person seeks a new loan or credit card, it shows that he is in serious financial need. Creditors generally don’t prefer to lend to such borrowers as the chances of defaulting are higher in such cases. Give yourself some time before applying for a new credit card. It may be difficult to resist yourself from not applying for a new credit card considering the tempting offers one gets on a daily basis but think about your future CIBIL score by pan card and how you can build it by being patient.
3. You closed or cancelled one of your credit cards: Your credit usage ratio or CIBIL score calculation is done by aggregating the credit limits on all of your credit cards. When you cancel or close a credit card, it impacts your credit utilization ratio, potentially resulting in a low credit score. In such a scenario, do not cancel your credit card especially, the older one as this will have an effect on your credit score.
4. Your credit card’s credit limit has been reduced: Your credit card credit limit is considered when the CIBIL score calculation is done. As a result, if one of your credit cards loses its credit limit, your credit utilization ratio will suffer, as will your credit rating. Even deleting one of your credit cards can have a major influence on your credit score because it reduces credit availability, which lowers your credit score. Contact your credit card company to see if your credit limit can be increased to its previous amount. Demonstrate your ability to repay the dues by submitting the recent income proof and your need for a greater credit limit.
5. Inaccurate data on your credit report: This could be another important reason for your credit score’s drop. Checking your CIBIL score by pan card on a regular basis is one of the best ways to ensure that every aspect of the information you have submitted is correct. It is possible that your lender accidentally has reported inaccurate information to credit bureaus, or that you have been a victim of identity fraud. If you find yourself in this situation, you should dispute the information with all three main credit bureaus (Transunion, Equifax, and Experian).
6. You signed your name as a cosigner on a loan: Co-signing on a loan for a family member or friend can damage your CIBIL score by pan card. For starters, the debt will appear on your credit report right away, and a larger debt load may have an influence on your credit score. Second, if a friend or family member fails to pay, the missed payments will be reflected on your credit report. If the account is eventually turned over to collections, it will also appear on your credit report. Even if you are required to cosign on a loan for a family member or friend, ensure that they are properly servicing the debt and are not missing or defaulting on payments.
7. Not keeping track of the spending habits of the additional credit cardholder: As the family’s provider, you may have a few add-on cards for your siblings or parents. Because you are the primary cardholder, if they misuse their card, it will have an effect on your credit score. Check your emails and SMSs on a frequent basis to see what is being spent on the add-on card. Set a daily spending limit on the add-on card if necessary to keep spending under control.

At last, 

We understand that seeing a drop in your credit score is never a good feeling but one needs to understand that credit score is not a static number. At the time of CIBIL score calculation, your CIBIL score can change from time to time and it doesn’t always mean you have done anything wrong. The key here is to go over the aforementioned points carefully and understand whether you have been doing that. Being able to recognize the reasons why your credit score is going down can help you take corrective actions quickly that will positively affect your CIBIL score as well.