How Does Missing A Single Payment Affect CIBIL Score?

It has become quite convenient for people to secure financing with many lenders offering online and doorstep loan application facilities. With easy credit facilities, it just takes a swipe of your credit card to purchase just about anything. However, the pitfall of this convenience is that many people fall into a debt trap when they cannot manage their repayments. A single missed payment on a high-interest-rate credit facility like a credit card can instantly lower your credit score. Additionally, payment defaults also attract huge penalties.

Credit scores are generated by credit rating agencies, CIBIL being one of them. A CIBIL report reflects your credit history and the credit score reflects your creditworthiness. A CIBIL or credit score is a three-digit number, issued in the range of 300-900. The best CIBIL score is one that is nearest to 900.

Factors Responsible for a Low Credit Score

Your CIBIL report derives its information from various lenders and banks. Lenders report the credit history of their borrowers to CIBIL. The CIBIL report is based on the last 24 months of your credit history whereas your credit score includes the last 36 months of your credit history. So, if you have a low credit score, it is important to understand the factors that affect the CIBIL score.

• Late or missed payments on loans or credit cards.
• Multiple Credit inquiries or loan applications within a recent period.
• Poor credit utilization ratio like maxing out or exceeding your credit card limit.
• Poor credit mix like more unsecured loans than secured ones.
• Errors in your credit report.

Can a Missed or Delayed Loan Payment Affect my Credit Score?

One of the most common reasons for a dip in a credit score is loan defaults. By loan defaults, we mean missing repaying your loan installments on the due date. Credit cards are high-interest credit facilities. Credit card companies allow you an interest-free period to use the credit limit. Post this interest-free period, a credit card bill is generated that is expected to be paid by a certain date. Your credit score takes an instant hit if the repayment is not done on time as loans like credit cards and personal loans are high-risk unsecured loans. Therefore, it is advisable not to go overboard with your spending, utilizing only an optimum percentage of your credit limit and not missing loan repayments.

Consequences of Missed or Delayed Loan Repayments

When you understand your credit score calculation and the factors affecting it, you can take remedial steps. It is important to know that even a single missed payment can negatively impact your credit rating. So, what could be the consequences of non-payment or delayed payment of your loan?

• Late payments are reported by lenders to CIBIL and get reflected in your credit report. This can hamper your chances of securing a loan or a credit card in the future.
• Not paying credit card bills or loan installments on time reflects badly on your creditworthiness. It may minimize your chances of getting approved for a loan.
• If your credit card bill or loan installment is not settled on the due date, it attracts heavy penalties such as interest charges, late payment charges, and finance charges. These charges could vary for secured or unsecured loans.
• Due to accruing of huge penalties on missed payments and the burden of future installments, you may get trapped in a debt cycle. A debt trap could prove challenging to get out of.

How Does Paying Credit Card Minimum Amount Due Affect my CIBIL Score?

If you have a pattern of paying only the minimum amount due over time, your credit utilization will increase, negatively impacting your credit score. A credit utilization ratio of more than 30% harms your credit score.

How to Check your CIBIL Online?

As a responsible borrower, you should regularly monitor your downloaded CIBIL Report and credit score. In case of any discrepancy, report it to CIBIL immediately. On the official CIBIL website, you can check your CIBIL score online and also download your free credit report. You can also check your credit score with your PAN card number. Many other sites also publish CIBIL details but there might be a fee involved.