My Credit Score has dipped over time despite no major financial activity. Why?

Has it ever happened that your credit score has dipped over time, without any major financial activity? As surprising as it may sound, it is a very normal thing for your score to see ups and downs. Your CRIF Credit Score is a dynamic number that falls and rises depending on your credit behaviour.

For example, when you apply for a loan, your score dips because of a hard inquiry. However, when you get the loan and start repaying it on time, a hike in your credit score can be witnessed.

The calculation of your credit score is complex and also varies from one credit bureau to another. It is preferable to stick to the bureau that your bank or credit lender has a tied-up with. Your credit report is basically a collection of all your credit information, any rise or drop can be traced back to one of the factors responsible for determining it.

Related Reads: Common Errors On Credit Reports That One Should Be Careful About!

What are the reasons your score experiences a dip?

a) Your Credit Utilisation Ratio increased

Every individual has an overall credit limit, which includes their loan amount eligibility and credit card limits. The credit utilisation ratio determines how credit hungry you are and whether or not you are eligible for credit. If your credit utilisation goes over 40%, you enter the credit hungry zone, which can impact your credit score negatively.

So any month that you might have made large purchases or consumed most of your credit card limit would result in a lower credit score. Often, this is the case during festive seasons when people purchase furniture, home appliances, or vehicles on credit, contributing a large part to the existing credit limit. Even if you repay the dues on time, this hike could get reported to the credit bureau before the time and impact your credit score.

b) You may have closed a credit account

Closing a credit account, like a loan or credit card, can affect your score in different ways, and it totally depends on the circumstances under which you closed it. Let’s say you have two credit cards and you end up using only one of them, say that the one you use frequently has an outstanding credit of Rs. 50,000 out of the Rs. 1 lakh credit limit. Even though you have used half of your available credit limit on this card, in totality, your credit utilisation ratio will be lower when calculated with both credit cards.

Now, if you close the one you aren’t using, your credit utilisation ratio will see a hike, which could drop your credit score by a few points. Apart from this, your credit score can see a drop even when you close a loan account before the time. Some loans charge penalties when closing an account in advance, and this could seem counterintuitive. Due to this, your credit score might see a drop despite paying the amount. Closing your old credit cards can also shorten your credit history, which can impact your credit score adversely.

c) A hard inquiry against your loan applications

It is an established fact that every time you apply for a loan or even make an inquiry at the bank about your eligibility, the bank runs a hard inquiry by pulling your credit score. This results in a small yet sudden drop as well.

This also includes credit card inquiries, car loans, etc. These count for hard inquiries that impact your credit score, but the impact is so small that it can often get missed while going through the report.

Always remember this: checking your own credit score does no harm, since it counts as a soft inquiry. So you can keep an eye on your personal credit score report throughout the year, just to stay updated on the activities of your credit profile.

Read More: What is a Hard Credit Inquiry?

Impact of Missed or Delayed Payments (Even Small Ones)

Payment history plays a critical role in determining your credit score. Even a single missed or delayed EMI or credit card payment can be reported to the credit bureau. Over time, such delays create a pattern that signals financial indiscipline to lenders. While one late payment may not cause a major drop, repeated or recent delays can significantly pull down your score.

How Long Does a Credit Score Dip Usually Last?

The duration of a credit score dip depends on the reason behind it. A temporary spike in credit utilisation or a hard inquiry typically impacts your score for a few months and improves once balances are reduced or enquiries age. However, dips caused by missed payments or defaults may take six months or more to recover.

Practical Steps to Prevent Unnecessary Credit Score Drops

To avoid avoidable dips in your credit score,

• Keep your credit utilisation below 30–40% of the total limit.
• Space out loan or credit card applications instead of making multiple enquiries at once.
• Maintain older credit accounts to preserve your credit history length.
• Set payment reminders and regularly review your credit report.

Conclusion

A credit score dip without major financial activity is often normal, but understanding the reasons behind it empowers you to take corrective action. By making timely payments, managing credit responsibly, and regularly monitoring your credit report, you can minimise fluctuations and build a strong, stable credit profile over the long term.

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