Credit score dropped despite paying on time? Here’s how to get it corrected

A sudden drop in your credit score can be alarming, particularly if you’ve never missed a loan EMI or credit card payment. While delayed repayments remain the biggest reason behind a lower score, they are not the only one. Incorrect reporting by a lender, unauthorised credit enquiries or even identity fraud can also affect your credit profile.

Experts say consumers should not ignore a sharp fall of 50 to 60 points, especially if there has been no significant change in their borrowing behaviour. Instead of focusing only on the three-digit score, they recommend reviewing the detailed credit report to identify the exact reason and taking immediate steps to correct any inaccuracies.

Can your credit score fall even if you’ve paid every bill on time?

Yes, say experts.

While timely repayments play a crucial role in determining a credit score, they are only one part of the assessment.

“While missed or delayed payments are the most common reasons for a credit score drop, they are not the only ones. Applying for a loan or a credit card may cause a slight temporary dip in your credit score. Multiple credit applications within a short span can lead to a more noticeable decline. Other factors such as high credit utilisation, closing old credit accounts or changes in your overall credit profile may also impact your credit score,” said Santosh Agarwal, CEO of Paisabazaar.

However, she added that these factors generally lead to relatively small movements in the score.

“A sudden 50- or 60-point drop is something you should not ignore. Though such a decline is usually caused by missed payments, it could also indicate an error in your credit report or even potential identity fraud. You should review your credit report immediately to identify the exact cause,” she said.

Puja Abhishek Singh, CEO of Manipal Fintech, said credit bureaus evaluate several aspects of a consumer’s credit behaviour, not just repayment history.

According to Singh, high credit utilisation, frequent loan or credit card applications, closure of an old credit account, an increase in outstanding debt or even errors by lenders while reporting customer information can all affect a credit score.

How can you tell whether it’s a reporting error?

The first step is to download your detailed credit report instead of relying only on the credit score shown on a banking or fintech app.

Agarwal said consumers should carefully verify whether any payment has been incorrectly marked as overdue, whether there are unfamiliar loan or credit card accounts, unauthorised hard enquiries or accounts that continue to appear as active despite being closed.

“If there are discrepancies like incorrect payment statuses, an active account which you may have closed, unfamiliar loan accounts or even hard enquiries that you did not initiate, you must report them to the concerned bureau and lender at the earliest,” she said.

Singh said that if the report instead reflects recent credit applications, higher credit utilisation or fresh borrowings, the fall is more likely to be linked to the consumer’s own credit activity rather than an error in reporting.

What should you do if you find an incorrect entry?

Experts advise consumers not to wait for the next reporting cycle.

Agarwal said the first step is to raise a dispute with the concerned credit bureau through its online dispute resolution mechanism.

“If you notice an incorrect entry in your credit report, immediately report it to the concerned bureau through its online dispute resolution process. At the same time, you should also inform the concerned lender, as the bureau relies on data provided by lenders to verify and update these details. You may be required to submit supporting documents to facilitate the verification and correction,” she said.

Supporting documents such as credit card statements, loan statements, payment receipts and bank transaction records should be kept ready, as lenders may seek them during the verification process.

How long does it take to correct a credit report?

According to Agarwal, genuine reporting errors are generally resolved within about 30 days, provided the consumer submits all the necessary documents and the lender responds promptly.

Once the dispute is resolved, consumers should download a fresh credit report to ensure the correction has been reflected.

Reviewing your credit report regularly and promptly disputing any incorrect information can help protect your credit profile and prevent unnecessary hurdles when applying for a loan or credit card.