The eligibility criteria for a lender approving your loan application are based on your credit score. It is an important aspect that lenders consider while approving a loan application. A perfect credit score should be more than 700. If your credit score is under 700, you can find measures to boost them. Although there are four credit bureaus in India that provide credit scores, many people prefer CIBIL. You can install the CIBIL score app on your mobile phone or use the official CIBIL platform to check CIBIL score.
Reasons Your CIBIL Score is Dropping
You can check CIBIL score by signing into the website of CIBIL. You can use the CIBIL score app because mobile applications are handier. The reasons why your CIBIL score is dropping are as follows:
- Failing to Pay Loan EMI on Time
Before accepting your loan application, lenders check your repayment history to endure that you can repay the borrowed loan amount on time. It is a vital aspect that regulates your credit score. You must pay even one EMI loan to maintain your credit score. While approving a loan application, lenders give more importance to your repayment ability. If lenders find your repayment ability needs to be improved, they might reject your loan application and consider you a high-risk borrower. Failing or missing to pay equated monthly instalments on time can reduce your credit score. You can recover your credit score if you pay early with the penalties for late payments.
- Credit Enquiries
Multiple inquiries on credit cards may negatively impact your credit score. Such complicated searches alert firms that keep your credit score. Therefore, challenging investigations lead to a drop in your credit score. The reduction in your credit scores because of multiple hard inquiries is temporary, and the credit scores will eventually increase when you take a card or stop your queries.
- Considerable Expense on Your Credit Card
The credit card utilisation ratio is vital in determining your credit score. When you spend heavily on your credit card. The credit utilisation ratio increases, resulting in a drop in your CIBIL score. If your credit card utilisation ratio is rising, you can improve your credit card’s limit. You can keep the credit card utilisation ratio and the purchases against the overall limit allotted below thirty per cent to ensure good credit scores.
- Closing Credit Cards
A credit card always has a specific limit; the boundaries are vital in estimating your credit utilisation ratio. Therefore, when you close your credit card, your utilisation ratio can increase, resulting in a drop in your CIBIL score.
What Can You Do When You Find that Your Credit Score is Dropping?
You can check CIBIL score with the help of the CIBIL official platform or install the CIBIL score app. When you find that your credit score is dropping, you can follow the steps mentioned below:
- Check Your Credit Report Frequently
You can check your credit report frequently for errors, misinformation, or fraud. Reporting false information to the concerned authorities and rectifying it on time can boost your credit score. You can check CIBIL score or install the CIBIL score app.
- Pay Dues and Loans on Time
Paying your equated monthly instalments and credit card dues timely positively affects your credit score because it highlights your good credit behaviour. You can keep repaying your dues on time, boost your credit score, and retain it.
- Judiciously Apply for Loans
You can apply for multiple credit cards unless you require them. You can restrict the number of new credit card applications, prohibit many hard enquiries on your credit report and aid you in retaining a high credit score.
- Settle Your Due Amount as a Last Option
You can avoid settling your due amount and repay your outstanding debts fully. Settling debts should be the last option. Although a settlement will decrease your debt burden, it shows your inability to tackle the finances judiciously, which may adversely affect your CIBIL score.
Whenever you apply for a loan, lenders will evaluate your earlier credit activities and check your credit score. A poor credit score can become a hindrance in securing the best loan deals, whereas good credit scores will give you access to good loan deals. Therefore, it is vital to retain good credit scores. You can check CIBIL score from the official websites of CIBIL or download the CIBIL score app. If you find your credit score to be less than your expectations, you can consider ways to boost your credit score with the help of systematic financial measures.