What is the Impact of Late Payment on CIBIL Score?

A CIBIL score is generated out of the user’s CIBIL report. The CIBIL report is an amalgamation of multiple factors like the user’s credit repayment history, debt repayment behaviour, the number of loans that existed, hard inquiries, user’s personal information etc. Any error, issue, fault, late payments, remarks, comments, etc. are reflected in the CIBIL report. These factors, however, impact the CIBIL score negatively. Thus, it is advised to work upon all such negative factors within the time before it becomes extremely difficult and challenging to improve the score.

In this blog, we will understand how only one of the many factors of late payment has a major negative impact on the CIBIL score and how you can avoid it.

What is Late Payment?

Late payment is an amount of credit money that a borrower submits to the bank or lenders after the due date or grace period. 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, a penalty, along with the credit amount has to be paid by the borrower.

What are the Impacts of Late Payments?

Late payment can impact a borrower in the following ways-

  • Late and delayed payments negatively impact the CIBIL score
  • It makes lenders and banks doubtful of receiving credit amount every month from the borrower
  • A lower CIBIL score makes it difficult for a borrower to improve it soon
  • Late payments nullify the reputation of a borrower

  • Banks charge a high penalty on delayed and non-payment of credit amount

  • Late payments make it challenging for a borrower to apply for a fresh loan or credit card

  • It might take months or even years to regain a normal or improved CIBIL score

Impact of Late Payment on CIBIL Score

The given table explains the impact of late payments on CIBIL score-

Time period

Impact on CIBIL Score

Less than 30 days

  • User will be charged a late payment fee and higher APR (APR is called Annual Percentage Rate. It includes interest on loan, fees and additional costs to acquire a loan)

  • The CIBIL score won’t get highly impacted if the applicant has made the payment before 30 days

30 days late

  • Highly impacts the CIBIL score if it happens frequently

  • One time 30-day late payment will not cause long-lasting damage to the score

60 days late

  • If it is for the first time, it won’t cause long-term damage to the score

  • If it is too often, it will highly damage the score

90 days late

  • The duration can hurt the score for approximately seven years

120+ days late

  • The duration can highly impact the score

How to Avoid Late Payments?

Late payments can be avoided if a borrower takes note of these few things-

  • Opt for Automated Clearance Service. The feature helps in deducting a particular credit amount every month

  • You can convert the outstanding amount into EMIs. However, be sure to pay the EMIs on time

  • If you have more than one credit card, spread the expenses across multiple cards. This way, you will be able to manage your credit utilization ratio

  • If you prefer to pay by cheque, it is good to make the payment 2-3 days prior to the due date

  • Set reminders to ensure timely payments

Read More: CIBIL Score: Features, Importance & How to Check It
FAQs
Is it true that late payments affect CIBIL score?
Late payments of credit card bills and loan EMIs affect the CIBIL score which further affects one’s chances of acquiring a loan or credit in the future.
How many times should I check my CIBIL report?
It is generally advised to check the CIBIL report twice a year.
Can a single delayed payment affect my CIBIL score?
Yes, even a single delayed payment can affect your CIBIL score and takes considerable time for improvisation.
What should I do to improve my Credit score?
Pay your credit amount on time, do not make hard inquiries, do not apply for multiple credit cards, use credit utilization ratio judiciously, maintain the right balance between secured and unsecured loans, and try to resolve credit report errors to the earliest possible and most importantly, understand the difference between how much credit you require and how much you can manage!
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