How Missing A Single Payment Affects CIBIL Score?

How Missing A Single Payment Affects CIBIL Score

CIBIL score plays an important role when it comes to applying for a loan or a credit card. The higher the CIBIL score, the better the chances of getting approved for a loan or a credit card. With a low CIBIL score, getting approval on time becomes nearly impossible. Even if a loan is approved, a borrower will lose out on benefits such as the power to negotiate the credit amount at a lower interest rate.

There are various factors that impact the CIBIL score such as outstanding amount, debt, half-settled payments, missed/delayed payments, etc. In this blog, we’ll look at how a missed payment can be one of the major causes of a low CIBIL score.

How a Missed Payment can Affect CIBIL Score?

A single missed/delayed payment has a long-term negative impact on the CIBIL score and may hurt the borrower’s creditworthiness. Furthermore, a low CIBIL score results in the rejection of loan or credit card applications. In short, to maintain a good credit score it is imperative to make timely payments and adhere to all of the CIBIL score-based best practices.

It can be further explained as follows:

  1. The impact and severity of a missed payment are so high that a borrower must work hard for months, if not years, to regain a good credit score.
  2. Payment defaults are classified into two types: minor and major. These are further explained as follows:
  • Minor payment defaults occur when a borrower misses or delays payment for less than 90 days. Such defaults are regarded as minor because banks and lenders believe they will be resolved quickly. However, the CIBIL score gets temporarily impacted here.
  • Major payment defaults occur when a borrower pays the credit amount but does so after 90 days. In this case, the CIBIL score suffers as a result, and the borrower loses the status of a good debtor. Furthermore, major payment defaults and a low CIBIL score both hinder loan/credit card approval.

It is recommended that both major and minor payment defaults be addressed and cleared as soon as possible.

How to Improve CIBIL Score?

Any type of payment default will have a negative impact on your CIBIL Score. A low CIBIL score also makes it difficult to get approved for a loan or credit card. Here is how you can improve the CIBIL score:

  • Be disciplined with the credit repayment
  • Never leave any unpaid debts
  • Maintain a credit utilization ratio of 30% or less
  • Don’t make multiple credit card inquiries or hard inquiries
  • Keep old credit card accounts open
  • Examine your credit score twice a year
  • Resolve the late payment issues as soon as possible

How Can I Avoid Making Late Payments?

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

  • Select the automatic debit option. This feature deducts a specific credit amount from the borrower’s bank account every month
  • Set up reminders for credit payment due dates and the deadline for payment
  • Convert outstanding payments into EMIs monthly

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Is it possible that a single day of late payment will affect my credit score?
Even a single late payment can have a negative impact on a borrower’s credit score, especially if the borrower has a good or excellent credit score.
Do late payments have an impact on your CIBIL score?
Late payments of loan EMIs and/or credit card balances lower the CIBIL score, which affects loan or credit card application approval.
How do I file a complaint about the incorrect CIBIL score?
To complain about any issues or errors in your CIBIL score or CIBIL report, file a dispute with the CIBIL.
How long does CIBIL keep track of the defaulter?
The Credit Information Bureau of India keeps the borrower’s information for a minimum of seven years from the date of the first payment default.
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