So, you finally got that personal loan, education loan, or vehicle loan. But a week later, your credit score takes a dip. Panic?
Not necessary. A drop in your credit score after taking a loan is more common than you think, and usually temporary.
Let’s decode why it happens — and what you can do about it.
First, What Is a Credit Score?
A credit score is a 3-digit number (300–900) that reflects your creditworthiness. It tells lenders how likely you are to repay a loan.
The higher your score, the better your chances of getting future loans, lower interest rates, and pre-approvals.
5 Reasons Why Your Credit Score Drops After Taking a Loan
1. Hard Inquiry by Lender
When you apply for a loan, the lender checks your credit report — this is called a hard inquiry. Each inquiry reduces your score by a few points.
📉 Impact: Minor & temporary
✅ Fix: Avoid applying for multiple loans at once
2. New Debt Increases Credit Utilization
Taking a new loan adds to your total debt, increasing your credit utilization ratio.
📉 Impact: Your debt-to-income ratio goes up
✅ Fix: Maintain low usage on credit cards, make regular EMI payments
3. Shorter Average Credit History
A new loan reduces the average age of your credit accounts, which may lower your score slightly.
📉 Impact: Small dip in credit age
✅ Fix: Don’t close older credit cards/accounts
4. Missed First EMI or Payment Delay
Missing your first EMI or paying late immediately affects your score and credibility.
📉 Impact: Significant drop
✅ Fix: Set up auto-debit for EMI reminders
5. Loan Account Not Yet Updated
Sometimes, your credit score drops temporarily because the loan status hasn’t been updated as “active” or “current” in your credit report.
📉 Impact: Looks like unverified debt
✅ Fix: Wait 30 days for credit bureau to update status
✅ Vizzve’s Pro Tip
If you took a loan through Vizzve, rest assured:
Your repayment history is automatically shared with credit bureaus
You can track credit score updates within the app
Vizzve sends EMI reminders to avoid late payments
📈 How to Rebuild Your Credit Score
🟢 Pay EMIs on time, every month
🟢 Don’t apply for multiple loans or credit cards at once
🟢 Keep credit card balances under 30% of the limit
🟢 Use auto-debit to avoid missed payments
🟢 Monitor your credit score monthly (use Vizzve tools or CIBIL)
❓FAQs
Q1: How long does the credit score dip last after a loan?
Usually 1–3 months. It recovers fast if EMIs are paid on time.
Q2: Does every loan affect credit score?
Yes, but only temporarily. Repaying on time actually helps your score long-term.
Q3: What’s a good score to aim for?
750+ is considered excellent.
Published on : 28th July
Published by : SMITA
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