Why Did Credit Score Fall Even After Paying Debt on Time ?

Know the reasons, Why Did Credit Score Fall Even After Paying Debt on Time  – In the world of finance and banking, your credit score is the reflection of your financial stability. There are various ways the credit bureaus like CBIL, Experian etc. consider while calculating your credit score. It is believed that the loan repayment history is given the maximum weightage among all the factors and any adverse event can significantly reduce your credit score. But this is not true all the time, there are various examples where your credit score may drop despite repaying EMIs or credit card bills by the due date.

Why Did Credit Score Fall Even After Paying all dues and loans on Time ?

There are many reasons for it other than the failure in repaying the existing debit. Few of the common factors are :

Credit Utilization Ratio (CUR)

You have exceeded overall credit utilization on your Credit Card. Maintaining the credit utilization ratio of your card/s. The credit utilization ratio is the proportion of the total credit limit utilized by you. An ideal Credit Card Utilization Ratio is 30% of overall limit. It means, your credit limit of the card should not exceed the 70% of the overall limit e.g. A credit Card with Rs 1,00,000 credit line, the maximum utilization must be less than Rs 70,000 per statement cycle.

Multiple Credit Enquires

A multiple credit enquiries related to credit card or loans within a shorter period of time reduces the Credit Score by significant points. Each time you apply for a loan or credit card, the lender assesses your creditworthiness by accessing your credit report from the credit bureaus. Such credit report requests initiated by the lenders are termed as hard enquiries, which pull down your credit score by a few points.

Where as the Soft Enquiries, as like enquiring for loans or credit cards with online financial marketplaces are treated as soft enquiries and are not considered by the credit bureaus while calculating your credit score.

Guarantor in Default Loan

Any delay or default in the repayment of the co-signed or guaranteed loan will impact your credit score as well. Hence, ensure that you regularly review the repayment activities of the loans accounts co-signed or guaranteed by you.

Secured Loan

Consumers with higher share of secured loans tend to be scored more favourably by credit bureaus, whereas those with a greater proportion of unsecured loans may be viewed more cautiously by lenders. Hence, always try to create a healthy credit mix to the extent possible.

Also Know – Why Shouldn’t You Invest all Savings to Stocks ?

You have closed the Oldest Loan Account or Credit Card

The longer your accounts have been open and in good standing, the maximum score . Having a 10-year old account on your report is a good sign, even if you don’t use it; closing that account and being left with accounts no more than five years old dramatically reduces the average age of your accounts.


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