A sudden dip in your credit score can be worrying, especially if you have always considered yourself financially disciplined. , and they only realise the impact when applying for a loan or a credit card. But the good news is that the reasons are often easy to identify, and with some effort, your score can be improved.
One of the most common reasons is missing payments. If you forget to pay your credit card bill or delay your loan EMI, it directly hurts your credit history. Even a single default can cause a sharp fall in your score.
Another factor is closing old credit accounts. Many assume that shutting down an old card will help, but in reality, it reduces your overall credit limit, which can drag down your score.
Your spending habits also matter. If you frequently use more than half of your available credit limit, it signals high dependence on borrowing. Ideally, credit use should be below 30% of your total limit to maintain a healthy score.
The first step is simple; clear all your dues without delay. Timely payment of credit card bills and EMIs is the most important step in repairing your record.
Next, keep your credit use under control. For example, if you have a credit card limit of Rs 10 lakh, try not to spend more than Rs 3 lakh on it. This makes you look like a responsible borrower in the eyes of lenders.
Finally, be careful with new loan or credit card applications. Every time you apply, the lender checks your credit history, and too many checks in a short time can lower your score. Space out applications and only apply for credit you truly need.
Simply put, your credit score is like your financial report card. A drop may feel alarming, but it is not permanent. With discipline, i.e., paying on time, using less credit, and borrowing wisely, you can improve your score and build a stronger financial profile for the future.