Can missing a single payment affect your CIBIL score?

Have you ever missed a payment of your credit card bill? Wondered if it affects your credit score? Every single missed payment does impact your score. The right question to probably ask is how much does a missed payment impact your CIBIL Score?

April 29, 2014 9:11 IST | India Infoline News Service
A lot of us have the habit of neglecting personal finances. At times we miss paying our bills on time and aren’t aware of consequences of the missed payment. Some people believe missing a payment here and there isn’t really much of a concern. However, ever since credit bureaus such as Cibil have come into existence, a single missed payment can bring your Cibil score down and hurt your creditworthiness – financial institutions might reject your loan application or reduce the spending limit on your credit card or you might just overpay on your existing loans.

The two factors that are crucial on the impact of your missed payments are recency of missed payments and severity of missed payments. If it was just one or two payments that you delayed in the past, it may hurt your score temporarily. But if it is beyond that and if it is a missed payment in the last six months and if you are applying for a loan now, it could hurt you dearly.

Missed and delayed payments are things lenders frown upon.However it is important to understand the difference between minor and major defaults. Any payments that are delayed or missed less than 90 days are considered minor defaults. This is considered minor because lenders believe that such a default could be cleared. Your Cibil score gets a temporary hit because of less than 90 day late payments.

If you delay a payment beyond 90 days, your account becomes a NPA and this is usually a big red flag for the lenders. The other derogatory remarks such as defaults or settlements also hurt your creditworthiness and your ability to take a loan in the future.

Both kind of defaults have different impact on your credit score and affect your loan eligibility in different ways.

So how would such a delayed payment actually affect you?

If yours is a minor default, you can actually catch up with the payment and your Cibil score will eventually bounce, though not to its original score, but somewhere close.

Your credit score however will be considerably lower as long as it shows that you are currently missing your payments.

Missed payments in past is one of the biggest reasons why new loan applications get rejected. Credit card companies who do frequent reviews on their customers might reduce the credit limit extended to you if they find your credit score is deteriorating. The intention behind such a practice is lenders take a call on whether or not they want to do business with you basis the credit risk they take. If they see that you are up to date on your payments, you are more likely to get better deals and higher credit limits.

So try not to miss your payments ever. If you do, catch up with it as quickly as possible. If you still have questions, you can always avail our FREE Credit Counseling services at CreditVidya.

The author is Co-Founder & Director, CreditVidya

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