How Missing A Single Payment Affects CIBIL Score?

CIBIL score plays an important role when it comes to borrowing a loan or a credit card. The better the CIBIL score is, the higher will be the chances of getting approved for a loan or a credit card approval. In case of a low CIBIL score, it becomes almost extremely challenging to get approval on time. Even in the case of loan approval, a borrower will lose opportunities to benefit such as credit negotiation power, lower interest rate.

There are numerous factors that affect CIBIL score, a few among them are outstanding amount, debt, half-settled payments, missed/delayed payment and so on. In this blog, we will understand how a missed payment can become one of the major reasons for a low CIBIL score.

How a Missed Payment can Affect CIBIL Score?

A single missed/delayed payment greatly impacts the CIBIL score for years and even hurts the borrower’s creditworthiness. And low CIBIL score further results in the rejection of loans or credit card applications. In short, it is a loop that can only be broken when a borrower starts making timely payments and remains disciplined with all the CIBIL score based best practices.

It can be further explained as-

  • The impact and severity of a missed payment is so high that a borrower needs to work hard for months and sometimes for years to regain a good score
  • Payment defaults are of two types- Minor and Major. These are further explained as-
  • Minor payment defaults are those in which a borrower misses/delays the payment under 90 days. Such defaults are considered minor because banks and lenders believe that they can be cleared soon. However, the CIBIL score gets temporarily impacted here
  • Major payment defaults are those when a borrower has paid the credit amount but after 90 days. In this situation, the CIBIL score gets affected negatively, and the borrower even loses the status of a good debtor. Further, major payment defaults and low CIBIL score, together hinder the loan/credit card approval process

It is advised to act upon both major and minor payment defaults, and clear them at the earliest.

Read More: Top Factors that Impact Credit Score Positively

How to Improve CIBIL Score?

Any kind of payment default is sufficient enough to create a negative impact on the CIBIL Score. The low CIBIL score further becomes a hindrance during the process of getting approved for a loan or credit card. Thus, it is important to resolve the issues before they become severe and challenging. Listed below are some of the ways through which a borrower can improve his/her CIBIL score-

  • Be disciplined with the credit repayment
  • Never leave any outstanding debts
  • Ensure to maintain a credit utilization ratio use by 30%
  • Don’t make multiple credit card inquiries or hard inquiries
  • Do not close old credit card accounts
  • Check credit score twice a year
  • Fix the late payment issues at the earliest

How to Avoid Late Payments?

There are multiple ways to avoid late payments; however, it is the responsibility of a borrower to follow a few practices-

  • Opt for an automatic debit feature. This feature deducts a particular credit amount every month from the borrower’s bank account
  • Set reminders for credit payment due dates and the date by which the amount has to be paid
  • Convert outstanding payments into monthly EMIs

Is it possible that a single day late payment can impact my Credit score?
Even a single late payment can impact a credit score, especially if a borrower has a good or excellent credit score.
Do overdue payments affect CIBIL score?
Late payments of loan EMIs and/or credit card balance reduces the CIBIL score, which further affects the approval of a loan or credit card application.
How can I complain about the wrong CIBIL score?
To complain about any issues/errors in your CIBIL score or CIBIL report, raise a dispute to the CIBIL to get the issues resolved.
For how many years CIBIL records the defaulter?
The Credit Information Bureau of India records the information of the borrower for a minimum of 7 years from the date of the first payment default.
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