Your company might be profitable, GST-compliant, and growing fast—but if your CIBIL MSME Rank isn’t up to the mark, banks won’t care. Thousands of Indian MSMEs face loan rejection or get stuck with high-interest financing simply because of avoidable mistakes that bring down your CIBIL MSME Rank.
In 2025, CMR (CIBIL MSME Rank) is one of the first checkpoints for MSME loan approval, OD/CC limits, vendor onboarding, and tender participation. Yet, many business owners unknowingly damage their own CMR and wonder why funding doesn’t come through.
This blog breaks down the top mistakes that bring down your CIBIL MSME Rank and how to avoid each one to protect your company’s creditworthiness.
What Is CIBIL MSME Rank and Why It Matters
The CIBIL MSME Rank is assigned by TransUnion CIBIL based on your company’s credit behavior. It ranges from CMR-1 (lowest risk) to CMR-10 (highest risk).
Your CMR is generated from your Company Credit Report (CCR) and reviewed by banks and NBFCs before approving:
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Working capital loans
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Overdraft (OD) and Cash Credit (CC) facilities
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Equipment financing
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Vendor credit and tender eligibility
A single mistake in your credit activity or reporting can significantly bring down your CIBIL MSME Rank—even if your business is stable otherwise.
Mistake #1: Settling Loans Instead of Closing Them
When you settle a business loan or credit card—i.e., pay less than the full outstanding amount—it’s marked in your CCR as “Settled”, not “Closed”. This flags your company as unable to repay in full, and severely brings down your CIBIL MSME Rank.
How to avoid it:
Always repay loans in full or negotiate a “Closed” status after settling by paying the remaining amount. You can raise a correction through CIBIL’s dispute portal.
Mistake #2: Delayed EMI Payments or OD Interest
Even a 5–10 day delay in EMI or interest payments is reflected as DPD (Days Past Due) in your CCR. Frequent DPD entries—even if small—can bring down your CIBIL MSME Rank over time and signal poor financial discipline.
How to avoid it:
Set auto-debit for loan EMIs and OD interest deductions. Monitor due dates regularly to avoid penalties and negative reporting.
Mistake #3: High Credit Utilization on OD/CC
Using 90–100% of your OD or CC limit frequently shows the bank that your company is operating on thin cash flow, which is a risk indicator in CMR evaluation.
How to avoid it:
Maintain credit utilization below 40–50%. If your limit is too low, request a gradual increase instead of overusing your current limit.
Mistake #4: Frequent Loan Inquiries in a Short Time
Every time you apply for a business loan, the lender checks your bureau data—this is called a hard inquiry. Too many such inquiries within a few months lower your CMR and show credit-hungry behavior.
How to avoid it:
Only apply for loans when you’re ready. Avoid applying with multiple banks at once. Let CreditCares run a soft check and advise you before applying.
Mistake #5: Loan Accounts of Group Companies Showing in Your Report
In many cases, especially in LLP or Private Limited firms, credit accounts of sister companies or directors show up under your entity due to KYC mapping errors. These extra accounts, if defaulted or overdue, directly bring down your CIBIL MSME Rank.
How to avoid it:
Check your CCR thoroughly for unrelated entries. If found, raise a dispute with CIBIL and attach board resolutions/KYC proofs to separate the entities.
Mistake #6: Mismatches in GST Returns and CCR Turnover
Banks and fintech lenders now cross-check GST turnover with what’s reported in your CCR. If there’s a big mismatch, they assume fraud or poor reporting—both of which bring down your CIBIL MSME Rank and may lead to rejection.
How to avoid it:
Ensure your GST returns (GSTR-1 and GSTR-3B) reflect actual business activity. Match them with financials shown in your loan applications.
Mistake #7: Ignoring Existing CMR Rank Before Applying for Loans
Most MSMEs don’t even check their CMR rank before applying. They get rejected, then try to fix it. By that time, damage is done—especially if there are multiple inquiries or rejections logged.
How to avoid it:
Before applying, buy your Company Credit Report and verify your current CMR. If it’s below 5, work on improvement first.
Mistake #8: Leaving Old or Dormant Accounts Active
Old OD or business loan accounts that are still open (even if unused) can lower your score due to inactive or overdue status. It signals bad account hygiene.
How to avoid it:
Close unused or dormant accounts formally. Request NOCs and ensure they’re marked as “closed” in the bureau.
Mistake #9: Submitting Incorrect Director or PAN Details
Wrong PAN, company name mismatch, or even an incorrect GSTIN can lead to your credit data being mapped incorrectly—or ignored completely—leading to CMR Rank NA, which is treated the same as high-risk.
How to avoid it:
Ensure all MCA, GST, and bank records use consistent legal names, PAN, CIN, and contact details. Fix any mismatch early.
Mistake #10: Not Monitoring Your CMR Regularly
CMR is dynamic. It updates monthly. If you’re not reviewing it every 30–60 days, small mistakes can become long-term damage.
How to avoid it:
Set a calendar reminder to download your CCR every quarter. Or let CreditCares handle real-time monitoring and notify you of any red flags.
FAQs on What Can Bring Down Your CIBIL MSME Rank
What is the most common mistake that brings down your CIBIL MSME Rank?
Settling a loan without full repayment is one of the most damaging mistakes—it gets marked and stays on your report for 7+ years.
Can my CMR Rank improve after correcting mistakes?
Yes. Many businesses see CMR improvement within 30–60 days of correcting errors, reducing utilization, or closing disputes.
Will a high CMR stop me from getting a loan?
CMR 7 or above is considered high risk. Most banks won’t approve, or they’ll demand full collateral. NBFCs may charge 18–24% interest.
Is it worth paying old overdue accounts just to improve CMR?
Absolutely. Even paying off ₹10,000 of a long-overdue account can improve your credit behavior profile and increase loan eligibility.
Can CreditCares help me improve my CMR?
Yes. We specialize in fixing CCR errors, managing bureau disputes, improving credit behavior, and guiding MSMEs to become loan-ready.
