Credit score fell by 100 points? These 6 common mistakes could be responsible

Seeing your credit score drop by 100 points can feel shocking and stressful. But don’t panic. Credit scores can change for many reasons, and in most cases, the damage can be repaired with the right steps. Understanding the possible causes is the first step toward improving your score.

Credit scores can fluctuate for a host of reasons, and in most cases, the damage can be repaired with well-planned remediation steps.

6 surprising causes of a big credit score drop

I. Missed or late payments

Your repayment history and payment integrity significantly impact your credit score. That is why, even a single missed credit card bill or personal loan EMI payment can result in a serious decline in your score. Lending institutions view late payments as a red flag and a clear sign of risk.

II. High utilisation of credit

To make the most of your credit card, focus on your approved credit limit. For example, if your credit limit is ₹1,00,000, you should ensure you never utilise more than ₹25,000-30,000 of it.

This will reflect responsible credit usage on your part. Furthermore, using more than 35-40% of your credit limit is a signal of credit hunger, high credit utilisation and greater dependence on credit, even if you pay on time. High credit utilisation can eventually lead to serious declines in your credit score.

III. Loan or credit card default

If your credit account is reported as ‘settled’ rather than ‘closed’ after you finish paying off a loan, or if the account goes into default, your credit score can drop sharply. Such a mark can stay on your credit profile for years and can even complicate securing future personal loans, credit cards and home loans. This indicates to lenders that you did not fully repay the debt under the terms of your earlier loan agreement.

IV. Hard inquiries

When you apply for multiple personal loans, credit cards or home loans within a very short span of time, such behaviour can result in several hard checks, i.e., ‘hard inquiries’ on your credit report. Furthermore, too many applications can temporarily lower your credit score and even result in your application being rejected.

V. Errors in your credit report

Sometimes, the problem is not your fault and has nothing to do with your credit behaviour. Incorrect information, mistakes in fetching PAN details, factual errors like a personal loan you never borrowed, or a late payment reported when you never were late, can bring down your credit score. These are common errors that can creep into your report. Checking your credit report regularly helps you find these mistakes early and resolve them quickly.

VI. Closing old credit accounts

Closing old credit cards can reduce your available credit and shorten your credit history, potentially lowering your score. Maintain your accounts, pay dues on time, and demonstrate responsible credit behaviour.

In conclusion, keep in mind, credit scores aren’t permanent. With timely payments, controlled spending, and regular monitoring, you can gradually rebuild your score. Consistent effort leads to steady improvement.

To check your credit score, click here. 

Disclaimer: MintMoney has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. MintMoney does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.