CIBIL Score dropped by 10 points

[himanshubansal93]

Dear Fellow Members,

Last month, I applied for a new credit card, and my credit card utilization increased to 10% (typically below 1%). As a result, my CIBIL score dropped by 10 points. Is this expected?

 

[hitirfan]

Is this expected?

Yes. New account brings 1-3 points, increase in Utilisation also decreases few points

 

[Personal Finance by Nish…]

Like the post and thank later if you find this helpful.

A 10-point drop in your CIBIL score is a relatively small change. Here's what might have contributed to this drop:

*Factors Affecting CIBIL Score:*
1. *New Credit Inquiry*: Applying for a new credit card triggered a hard inquiry, which can temporarily lower your score.
2. *Credit Utilization Ratio*: Increasing your credit utilization ratio to 10% might have negatively impacted your score. Aim to keep this ratio below 30% for optimal scores.
3. *Credit Mix and New Credit*: The new credit card application might have altered your credit mix, which accounts for 10% of your CIBIL score.

*Expected Score Drop:*
A 10-point drop is a relatively minor change. Here's a rough estimate of how different factors can impact your CIBIL score:

- *New Credit Inquiry*: 5-10 point drop
- *Credit Utilization Ratio Increase*: 10-20 point drop (depending on the extent of the increase)
- *Credit Mix Changes*: 5-10 point drop (depending on the significance of the change)

*What to Do:*
1. *Monitor Your Credit Report*: Ensure there are no errors or inaccuracies on your credit report.
2. *Reduce Credit Utilization*: Bring your credit utilization ratio back below 1% to demonstrate responsible credit behavior.
3. *Make Timely Payments*: Continue making on-time payments for all your credit obligations.
4. *Avoid New Credit Inquiries*: Limit new credit applications to avoid further hard inquiries.

Keep in mind that CIBIL scores can fluctuate over time due to various factors. Focus on maintaining good credit habits, and your score should recover or even improve over time.