February 21, 2026 · 5 mins read
Santosh Kumar
Most borrowers in India think that timely repayment of loan EMIs ensures a stable or increasing credit score. Though on-time repayment is the biggest factor in your credit health, it’s not the only factor. Your credit score represents a variety of factors about your borrowing patterns, and can, at times, decline even if you’ve never missed a payment.
Knowing why this occurs will allow you to better control your credit profile and not be alarmed without cause.
The score is derived from information in your credit report with TransUnion CIBIL. This report provides information on your loans, credit cards, repayment habits, balances and credit enquiries. Because multiple factors impact your score, factors other than your EMI payments could change and modify your rating, even if your EMI payments remain unchanged.
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High credit utilisation is one of the most frequent causes of a decrease in your CIBIL score. This is the amount of your credit limit that you are using, and especially on cards.
So if your credit card limit is ₹1 lakh and you typically run up ₹80,000, then your utilisation ratio is 80%. A high ratio, on the other hand, is a warning that you rely too much on credit and perhaps are under financial duress and that can reduce your score. This can occur even if you pay in full on time each month.
Most credit experts suggest staying under 30 per cent credit utilisation.
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Multiple loans or credit card applications in a short span will also hurt your credit score. Every time you apply for credit, the lender reviews your credit report, causing a hard enquiry. Too many such enquiries imply increased credit demand and can damage your score.
Even if you pay your EMIs on time, such credit hunting makes you look risky to lenders.
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A lot of people believe that shutting down unused credit cards or antiquated loan accounts is good for their credit. But that can sometimes lower your credit score.
Older accounts help lengthen your credit history — something that lenders like. Shutting them down shortens your credit history and could lower your overall credit limit, thereby increasing your utilisation. Either can hurt your score.
Keeping long standing accounts with a good repayment record typically bolsters a stronger credit.
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Your credit mix is the different types of credit you use, for example secured loans like home/car loans and unsecured credit like personal loans or credit cards. A balanced mix means you’re managing credit responsibly!
If you close a secured loan or take on multiple unsecured loans, for example, your credit mix can turn unfavourable. This change can impact your score, even if your payment habits stay the same.
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Occasionally, your score may fall because of reporting errors or late updates on payments. Lenders regularly report your repayment information to credit bureaus. And if they’re late or misreport, your credit report will be temporarily garbage.
If you have previously closed a loan or restructured a loan, it impacts your credit score, even if you clear present EMIs on time. And a settlement means the borrower didn’t repay the full amount that was agreed upon – a bad sign for lenders.
Your credit score may also be impacted by loans for which you are a guarantor/co borrower. If the principal borrower is late on payments or defaults, it can affect your credit profile, even if you personally have an impeccable repayment record.
Your score could still fall for reasons such as having too high of a credit utilization ratio, too many credit inquiries, a changing credit mix, or incorrect information on your credit report, despite the fact that you have been paying your bills on time.
You should review your credit report at least once or twice per year to find out if there are any errors, keep track of any changes and maintain good credit health.
It is not unusual for it to take months or years to rebuild a CIBIL score; however, continuing to pay bills on time, keeping the utilization of credit to a low level, and using credit responsibly will help you increase your CIBIL score over time.
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