CIBIL score is a three-digit numerical representation of an individual’s creditworthiness, ranging from 300 to 900. A higher score implies a better credit history, while a lower score implies a poor credit history. It is one of the most critical factors considered by financial institutions to approve loan or credit card applications. The CIBIL score is based on an individual’s credit history, including credit card usage, repayment history, loan repayments, and defaults.

Maintaining a good credit history is essential to obtain loans or credit facilities at lower interest rates, while a poor credit score can lead to higher interest rates or loan application rejection. Hence, each point on the credit score holds significant importance. However, despite taking preventive measures, unforeseen events may result in immediate depletion of your CIBIL score. Therefore, it is vital to be aware of the reasons for such depletion and learn how to prevent them:

• One of the major causes of immediate CIBIL score depletion is late or missed payments. Failing to make payments on time indicates a lack of financial responsibility, and missing payments affect credit score. It’s important to note that even a solitary late payment can cause a sudden drop in your credit score.
• Credit utilization is the proportion of your credit limit that you are presently utilizing. A high credit utilization rate may suggest that you are overburdened with debt and unable to manage it effectively. Even if you make timely payments, high credit utilization can result in an abrupt reduction in your credit score.
• Another factor that can lead to an immediate decline in your credit score is closing old credit accounts. When you close a credit account, your available credit decreases, resulting in an increased credit utilization rate and a reduction in your credit score.
• Whenever you apply for a loan or credit card, the lender reviews your credit report through a credit inquiry. Repeated credit inquiries within a short duration may imply that you are in dire need of credit and struggling to manage your debt. This can result in an immediate decline in your credit score.
• Defaulting on a loan means failing to make payments as agreed, and it can lead to a significant negative impact on your credit score, resulting in an immediate drop.

To sum up, having a good credit score is essential for obtaining loans or credit facilities with lower interest rates. However, certain circumstances can cause an immediate drop in your CIBIL score. Nevertheless, by recognizing these factors and taking steps to avoid them, you can maintain a good credit history and a high credit score. Remember to make your payments on time, keep your credit utilization low, keep your old credit accounts open, limit your credit inquiries, and prevent loan defaults.

Also have a look at: How to Improve Cibil Immediately