The #1 Mistake That Could Destroy Your CIBIL Score – What You Must Know

A healthy CIBIL score is crucial for your financial well-being, but many people make errors that cost them lakhs. 

A 27-year-old Delhi-based marketing professional, Neha, discovered the significance of a good CIBIL score from her experience. She received a monthly salary of ₹75,000 and distributed her income in the following manner:

• ₹2,000 EMI: Smartphone
• ₹5,000 EMI: Laptop
• ₹10,000 Credit Card Bill: Shopping & Travel
• ₹15,000 Rent: Monthly Apartment Expense
• ₹8,000 Miscellaneous: Food, OTT, and Dining

Despite this, she only paid the minimum due of ₹4,500 to ₹5,000 each month on her credit card instead of clearing the full bill. She believed her credit limit of ₹1,50,000 would provide sufficient financial protection.

What Happened Next?

• Loan Application: ₹10,00,000 Car Loan
• CIBIL Score Checked: 580 (Needed: 750+)
• Loan Rejected: The lender denied the loan because she consumed 50% of her ₹1,50,000 credit limit, which is ₹75,000.
• Interest: She accumulated ₹3,50,000 in interest payments for 3 years after her credit card dues remained unpaid.
• CIBIL Drop: From 780 to 580 in 14 months

Why Did This Happen?

Neha’s mistake? Paying only the minimum due. 

Her credit utilisation ratios surged beyond 50%, her unpaid debt steadily increased, and she accumulated high interest rates ranging from 36% to 42%. 

Read More – How to Fix Errors in Your CIBIL Report Fast

A few months later, her CIBIL score fell abruptly while creditors categorised her as an elevated-risk borrower. The cost? ₹3,50,000 extra in interest and a rejected car loan.

Score High, Stay Fly!

• The key to retaining a CIBIL score of 750 or above is that you should pay your entire credit card expenses instead of settling for the minimum payment.

• Your credit utilisation should remain below 30% of your available credit, which means if your limit is ₹1,50,000, you should not spend more than ₹45,000 Emptying your card balance leads to extensive late fees and outrageous interest rates.

• An excellent CIBIL score unlocks simpler loans along with better financial chances for you, so watch your credit usage carefully to avoid losing big benefits because of minor mistakes.

What Is a CIBIL Score and Why Does It Matter?

A CIBIL score from 300 to 900 demonstrates your credit value to lenders. The first step lenders take before a loan or credit card application is the CIBIL score check. 

A credit score of 750 or higher increases your likelihood of approval and offers lower rates. Scores lower than 750 reduce the probability of approval and may result in a higher interest rate.

Numbers That Define Your Credit Health

• 750+ Score: Financers approve 90% of loan applications and charge annual interest rates between 8% and 10% per annum.

• 600 to 750 Score: The loan approval process requires specific income verification and bank approval policies, while the typical interest rates vary between 12% and 18% annually.

• Below 600 Score: Lenders tend to reject loans completely or maintain high rates of 24% to 36% for those who score below 600.

Example:

The following table shows a difference between the two applicants, Neha and her friend Meha, when they apply for a ₹5,00,000 loan for 5 years with distinct CIBIL scores:

The #1 Mistake That Can Wreck Your CIBIL Score

Here it is... the biggest CIBIL score destroyer in 2025 is "Consistently Missing EMI or Credit Card Payments."

The culture of delayed payment brings severe harm to your financial profile and CIBIL score. The act of non-payment at the due date adversely altered the CIBIL score of Neha in the following manner:

BNPL (Buy Now, Pay Later): A Hidden Trap?

BNPL plans are the new trend, but are they? We unknowingly abuse BNPL and accumulate shadow debt. Missing a BNPL payment has the same effect as missing a credit card bill, and it hurts your CIBIL score and includes penalty fees.

How BNPL Can Damage Your CIBIL Score

Maxing Out Your Credit Card: Danger Zone!

Exceeding 30% of your credit limit can damage your CIBIL score and financial health. Here's why:

1. CIBIL Score Fall

• Paying more than 50% of your credit limit can lower your score by 50-100 points, making it more difficult to avail oneself of loans or credit cards.
• Neha's Case: An increase in Neha's usage from ₹25,000 to ₹45,000 (25% to 45% of her credit limit) caused her CIBIL score to drop from 780 points to 750 points.
• Your CIBIL score stays healthy when your credit usage stays below 30%.

2.   Loan and Credit Refusal

• An institution will limit the opportunities for approval on loans and credit cards when an individual demonstrates extreme credit line usage.
• Neha's Case: When she consumed her ₹1,00,000 credit limit, this incurred a home loan decline because her CIBIL score fell to 680.
• Don't load your credit card to the maximum; raise the credit limit to budget expenses better.

3.  Increased Interest Rates

• Unpaid amounts incur 36% to 48% per year in interest, making it increasingly difficult to repay debts.
• Neha's Case: She could not pay her ₹1,00,000 credit card bill, and with a 36% interest rate, her debt grew to ₹1,36,000 in just one year.
• Settling your bill before the monthly cycle ends protects you against costly interest charges.

4.   Debt Cycle

• Using a maximum credit card combined with late payment issues creates a trap that keeps you in debt circles indefinitely.
• Neha's Case: Her situation worsened when she took another loan to pay off her outstanding credit card debt, along with unmanageable dues. 
• Establish auto-payments or reminders to get the better of your credit card bill.

How Ignoring Your Credit Report Can Hurt You

Would you operate a vehicle without first looking at the fuel indicator? Driving blindfolded is similar to ignoring your credit report. Suspicious errors, fraudulent transactions, and unauthorized loans can damage your CIBIL score.

How Ignoring Your Credit Report Can Hurt You?

Multiple Loan Applications: A Red Flag!

When you apply for multiple loans in a short period, you seem desperate for credit and approach the lenders as someone who is perhaps financially weak. The lender then has less to no interest in lending to you. 

You are no longer a “good” or “qualified” borrower, which can either go on or even worsen your chances of being approved by the lenders. All the while, those hard enquiries are also negatively affecting your CIBIL score.

How It Affected Neha:

• Neha applied for three personal loans within two months, which led to multiple hard enquiries and, consequentially, a drop in her CIBIL score from 750 to 710.

• Lenders viewed her through the lens of all the hard enquiries instead of a stable income, which raised her risk profile and led to her applications being rejected.

• Fix It: Wait at least six months before applying for another loan application and check your CIBIL score before applying to make sure you are not negatively affected.

Debt Consolidation: A Smart Escape Plan

It converts various high-cost debts into one consolidated loan at a more favourable interest rate. The debt consolidation approach both lowers overall interest payments and simplifies your repayment plan, leading to improved credit scores when handled correctly.

Neha’s Before & After Debt Consolidation:

How To Fix a Low CIBIL Score?

A dropped CIBIL score can be repaired through proper actions. Here’s what you need to do:

1. Pay off outstanding dues immediately to prevent further damage.
2. Try to avoid taking out new loans for several months to avoid unnecessary hard enquiries.
3. Negotiate with bankers for a payment plan to settle debts orderly.
4. Use a secured credit card wisely to rebuild creditworthiness by making timely payments.
   
   Also Read - How to Fix Errors in Your CIBIL Report

Top Tips to Keep Your CIBIL Score Healthy in 2025

• Timely payment of EMIs and credit card dues to prevent penalties and score erosion.
• Maintain credit utilisation below 30% to demonstrate good credit use.
• Check your CIBIL score regularly to track progress and spot errors.
• Avoid unnecessary loan requests to avoid multiple hard enquiries.
• Debt consolidation may be considered when experiencing high-interest loans to facilitate payments.

Conclusion

A high CIBIL score is not a figure—it's your financial passport. Small oversights such as missing EMIs, overspending on credit cards, or neglecting your credit report can cost you lakhs in increased interest and rejection of loans. Take a leaf out of Neha's book and control your credit health. Pay bills on time, have low credit utilisation, and check your score periodically. Remain financially savvy, and your future self will thank you!

FAQs

• How long does a missed EMI affect my CIBIL score?

For 6-12 months, frequent defaults create long-term harm.

• Can I get back my CIBIL score after a fall?

Yes! Pay dues, lower credit usage, and don't apply for loans frequently.

• How frequently should I monitor my CIBIL score?

Every three months to detect errors and track progress.

• Do BNPL payments influence my CIBIL score?

Yes, late payments reduce your score like a credit card default.

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LoansJagat Team

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