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Every individual who has borrowed from a bank, has an outstanding loan, or owns a credit card knows just how important CIBIL score is for their profile. Credit or CIBIL score is the tool that helps lenders assess the creditworthiness of a borrower. When borrowers apply for a personal or home loan, credit card, etc, lending institutions request for their latest credit report, and it is their credit score that is checked to determine if the application can be approved and processed further. 

However, sometimes borrowers try their best to maintain a good score and they feel that they are making timely payments, but their score is still low or hasn’t improved for quite some time. There could very well be many reasons why an individual’s credit score may not be improving, and it is imperative to understand it in detail.

7 Reasons Your Credit Score Isn’t Improving

There are many factors that go into deciding the CIBIL score of an individual and it gets difficult to understand the exact reason why this score is not improving.

Let’s take a look at the top 7 reasons why your credit or CIBIL score may be stuck or not improving:

 

1. Poorly managed credit card balances

If you have searched the internet trying to find out ‘why my CIBIL score is not increasing’ then one of the crucial reasons can be your poorly maintained credit card balances.

Most credit card users often focus on getting a higher credit limit sanctioned on their cards but forget about the Credit Utilisation Ratio i.e., the ratio of the expenses you generate on your card to the total credit limit approved on the card. If you frequently spend most of your credit limit then that could mean you are highly dependent on credit to manage your expenses on a monthly basis.

The limit approved on the credit card is set as a maximum amount that can be utilised by the cardholder. However, every cardholder must make it a practice to use not more than 30% of their credit limit and a maximum of 50% of the limit.

2. Delay in making payments

Making timely and routine payments is one of the major deciding factors when it comes to CIBIL score. Late payments, or even not making payment in full, can directly impact your CIBIL score.

When you apply for a new loan or credit card in the future and the lenders review your credit report, they are keen to know how reliable you are with the credit, your frequency of repayment, etc. Delinquent payments is one of the reasons most lenders write off applicants and determine their creditworthiness as poor, which is serious as it reduces your capability of being approved for a loan, credit card etc, in the future.

Be it paying your loan EMIs or credit card monthly bills, even delaying a single payment could be bad for your credit score. Hence, if your credit score is not improving even after you have tried other ways, start tracking your payment dates and ensure you make payments on or before time. Gradually, this should help improve your CIBIL score.

3. Applying for too many credit cards

Often people end up applying for too many credit cards and then seem confused when their credit score is impacted. If you have also done something similar and find yourself searching for ‘why my CIBIL score is not increasing’ on the browser, then revisiting your credit cards can be one of the solutions. More the credit cards, higher the chances of you being dependent on credit for your expenses and that will only decrease your creditworthiness.

4. Taking multiple loans

Applying for multiple loans is like owning too many credit cards, it could gravely affect your credit score. If you have applied for multiple loans at the same time or even separately, lenders may not give a very financially stable picture of you. Moreover, application for new loans will also end up showing on your credit reports as hard enquiries, which could be a reason why your credit score is not improving.

5. Focusing on shutting down unused accounts

Many times when you look up ‘my CIBIL score is not increasing’, there is a chance that while you may be trying a lot of things to improve your score, your closed old accounts could also have come in the way.

There are many account holders who think that old credit accounts could impact their score negatively and hence they often close such accounts. However, this could work in the borrowers favour too. An old account will be testimony to how well the borrower has been responsibly handling credit for so long and that could help him get competitive interest rates and better offers in the future too.

6. Past negative records

Often the primary reason for your CIBIL score not improving could be your past payment records working against your current credit report. You could have negative past records if you have defaulted a loan in the past, delayed a few payments or more, not paid in full more often, or for many other reasons as well.

In some extreme cases, if the borrower has declared bankruptcy in the past then this will stay on their record for the next 7 years. Due to this, even if the borrower is making timely payments now or keeping a low credit utilisation ratio, it still wouldn’t help in improving the CIBIL score.

7. Mistakes in your credit report

Borrowers often forget to request for a credit report from time to time. This is like a routine health check-up, wherein you must be aware of what your credit score looks like and whether there are any errors in your report.

There could be small mistakes like name being misspelt, wrong PAN details, double reporting of loan, or a simple late payment entry which may not be the case. It is therefore crucial that credit reports must be routinely checked to identify such mistakes and get them rectified in time. If you have documented proof of account closure or your credit payments, loan closures etc, then it will be easier for you to get it rectified.

Conclusion

Every individual needs to understand the importance of building and maintaining a good CIBIL score. A good CIBIL score is what helps you get loan approvals and even negotiate for competitive rates. Moreover, it improves your creditworthiness as a borrower, which makes you an ideal candidate for lenders, be it approving applications for loans, credit cards, insurance and more.

It is important to work on improving your credit score and CIBIL score but you must also not forget that maintaining a good score is also just as crucial. A single error or late payment, no matter how small, could also impact your credit score negatively.

Building a credit score takes time, effort, and commitment. You need to have the patience to work on improving your score as the results will also start showing after a few months of routine efforts. From making timely payments to making payment in full and from using minimal credit on credit cards to ensuring accuracy of credit report, a lot can be done to improve the CIBIL score.