What is the Impact of Late Payment on CIBIL Score?

A CIBIL score is essentially the result of a user’s credit history and credit repayment behaviour. All of these details, and many more, are documented in a CIBIL report, which includes information such as the user’s credit repayment history, debt repayment behaviour, the number of loans borrowed, hard inquiries, the user’s personal information, and so on. Any errors/issues, late payments, remarks or comments regarding the user’s credit history are directly reflected in the CIBIL report. However, these factors have a negative impact on the CIBIL score. To maintain a healthy CIBIL score, it is recommended that all such negative factors be addressed as and when they appear in the report.

In this blog, we will discuss how one of the many factors of late payment has a significant negative impact on the CIBIL score and how to avoid it.

What is Late Payment?

Late payment is an amount of money that a borrower sends to a lender or bank after the date when the payment was due or after the grace period for the payment has passed. Due dates are set by the banks and lenders by which a borrower needs to pay off his/her credit and loan amount. Post the due date or grace period, a penalty is charged by the lender/bank which must be paid by the borrower along with the credit amount.

What are the Impacts of Late Payment?

Late payments can have the following consequences for borrowers:

  • Payments that are late or delayed have a negative impact on the CIBIL score
  • It makes lenders and banks sceptical of the borrower’s ability to repay the credit amount on a monthly basis
  • The lower the CIBIL score, the more difficult it is to improve it
  • Late payments have a negative impact on a borrower’s reputation
  • Banks charge a high penalty on late and non-payment of credit balances
  • Late payments make it difficult for borrowers to apply for a new loan or credit card
  • It could take months, if not years, to regain a normal/standard CIBIL score

How to Avoid Late Payments?

Late payments can be avoided if a borrower remembers the following-

  • Select the Autopay option. Autopay means that a set amount will be deducted from the borrower’s account on a set date each month. It is essentially a feature that instructs lenders or banks to deduct money from the borrower’s bank account on a monthly basis. This feature has been shown to be the most beneficial for borrowers who fail to make timely credit payments
  • You can convert the outstanding balance into EMIs. However, make sure to pay your EMIs on time
  • Spread your expenses across multiple credit cards if you have more than one. This way, you will be able to manage your credit utilization ratio
  • If you prefer to pay by cheque, make the payment at least 2-3 days before the due date
  • Set up reminders to ensure that payments are made on time

Check Cibil Score

Is it true that late payments have an impact on a person’s CIBIL score?
Late payments on credit card bills and loan EMIs have a negative impact on one’s CIBIL score, which further reduces one’s chances of obtaining a loan or credit in the future.
How often should I review my CIBIL report?
It is generally recommended that the CIBIL report be checked at least twice a year.
Can a single late payment have an impact on my CIBIL score?
Yes, even a single late payment can have a negative impact on your CIBIL score and requires a significant amount of time to rectify.
What should I do to improve my Credit score?
To improve your credit score, pay your credit card balance on time, avoid hard inquiries, do not apply for multiple credit cards, use your credit utilisation ratio wisely, maintain a proper balance of secured and unsecured loans, and try to resolve credit report errors as soon as possible. Most importantly, you must understand the difference between how much credit you require and how much you can manage!
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