Impact Of Late Payment On Cibil Score



 

In our fast paced lives, things have become both simple and complicated at the same time. For instance, it is so easy to skip a single payment while things aren’t so simple after that. So, what happens when you skip a payment or two or a few? Well, obviously there are going to be some setbacks especially if you are trying to apply for a loan or a credit card. Although, it may not seem like much, missing a single payment is definitely not good for your financial health.

You must be thinking, it would hardly make much of a difference; however it does. A couple of things that come into play if you happen to skip payments include:

- reducing your CIBIL score
- negative remarks/ comments in your credit report
- rejection of your loan/ card application

And these are only some of the effects, but these are definitely the ones with a high impact on your financial life. Why, you ask?

Here’s why.

You missed your credit card bill once, that’s probably okay. Yes, your CIBIL score will be lowered, but you can get it back up in no time – provided you don’t make the same mistake again.

However, if you have made more than one delay payment or skipped them all together – you are in trouble. Not only will this affect your CIBIL/credit score but it will also mean that banks will classify you as a ‘defaulter’ and hesitate to grant you a loan.

An important aspect to skipping payments is – its recency. If you have missed your payment and have not fulfilled it within 90 days, then it is definitely a problem. As this will reflect in your CIBIL report, banks will not think twice to reject your application. Well, because they know you have a tendency to not pay your dues in time - which is as you know bad for them.

Maybe, you didn’t mean to skip your bills, but it happened. Nobody is going to question your character or intention at the time of applying, your report will speak for itself; based on which you may or may not get your loan granted. Moreover, getting rejected is not only going to not get you a loan, but it also a means that in future if you happen to apply elsewhere – your reputation as a prompt re-payer will probably be tarnished because the records will have permanent proof of your late payments.

So, what’s the solution? Like we always say – Prevention is better than Cure. Which is why, avoid missing or delaying payments. But, what if you have already made the mistake? Well, it’s never too late, just ensure that you don’t repeat it in the future. Ever.

Late payments are not good for your free CIBIL score- there are no two ways to it. However, at the same time, it's important to learn how they actually make an impact, especially considering that there are many myths surrounding the same.

The following are 6 most common myths related to late payments that you should know of:
  1. A Single Late Payment Isn't a Big Deal

A large number people still believe that one late payment doesn't make a difference in your credit report. However, this is not true.

When it comes to credit score calculation, every single payment matters. Although the amount of damage a single late payment does may vary from one credit rating agency to another, there is usually at least some amount of damage one way or another.

There are many factors that affect the impact of a single late payment. For instance, if you had made another late payment in the recent past, then the damage would be more. Similarly, if you have made late payments in other accounts as well, then again, the impact would be greater.

  1. Making the Payments Fixes the Credit Report

While it's important to pay your credit card bills and loan EMIs on time even if late, lest your name should end up on a loan defaulter list, doing the same doesn't actually solve the problem completely.

Whenever there is a delay is a payment, the lender reports the same to their credit bureau who, in turn, puts the same in the credit report. So, while you don't have any financial obligations to the bank, your report is marred.

Fortunately, you can have the remarks of late payments removed from your report by contacting your bank and requesting them to strike these off on the basis of goodwill. Although there is no guarantee that they will comply.

  1. The Number isn't Important

It's a common misbelief that the number of times you have delayed payments is irrelevant to the calculation of a free CIBIL score

People think that whether you make one late payment or three, it makes no difference as late is late. However, nothing could be further from the truth.

The number is important and there are two main factors- the number of late payments, and the gaps between these payments. So, the higher the number and smaller the gaps, the greater the damage.

  1. You Get 30 Day Grace Period

It's true that most lenders give you up to 30 days to make a late payment before they report the same to the credit rating agency. However, that's not always the case.

Your lender may report a late payment even if you are late just by one day. It mainly depends on your credit history and how stringent they are with their loans.

  1. "Settling" an Account Cleans up your Late Payments Mess

If you have been late with the payments on a consistent basis for a long time and/or made it to the loan defaulter list, then your lender may step in and offer account settlement. If you accept it, you can close the ledger by paying only a portion of the balance. However, this greatly damages your CIBIL report which is why it must be avoided at all costs.

  1. Late Payments by Co-Borrower Doesn't Affect You

If you have taken a joint loan with your spouse or a family member, then you both share the liability of the repayment. In other words, even if you are paying your share of the EMIs on time but your co-borrower isn't, then not only their CIBIL report will be affected, yours will too.

Payments when delayed can be really bad for your credit health. Thus, always be sure to pay your bills on time and check your report frequently.

Finally, In the grand scheme of things, missing a single credit card payment is a relatively minor mistake, and one you can learn from. Don’t beat yourself up over it. You might have to pay a late fee and other penalties, but if you catch your error soon enough, it won’t cause lasting damage. And if it’s the first time you’ve slipped up, your creditor might waive fees and penalties. Chalk it up to experience, and make sure to get your next payment in on time.

 
 

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At Millennium Credit Solutions, we believe that life is easier with excellent credit.
We have a dedicated staff devoted to assisting you with your future financial needs.
We provide advice and information on how to best manage your current credit to maximize the impact to your qualifying ability.
 
 

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