The RBI regulates CIBIL (Credit Rating and Information Bureau India Ltd), a three-digit dynamic number assigned to individuals and businesses (Reserve Bank of India). This score is used by banks and financial institutions to assess the repayment prospects of loan and credit card applicants. Credit history, debt repayment timelines, the number of existing loans, loan application frequency and defaults, and other parameters are evaluated using complex statistical calculations. Each of these elements plays a significant role in determining the CIBIL score. As a result, missing the deadline has a negative impact on the grade.
What is late payment?
Banks and financial institutions are given a due date for loan and credit card payments. On the due date, any default or late payment of credit or card bills will be recorded as a delayed payment in CIBIL. Even after a consistent record of on-time payments, the score drops with each payment delay, but it takes much longer.
Late payments damage personal and business creditworthiness, making future credit approvals more difficult. Lenders view loan approvals with a low CIBIL score as a risky proposition, whereas a good credit score provides some assurance that the debt will be recovered.
How does late payment affects your CIBIL score?
Late by less than 30 days
It has little impact on your credit score if you miss a credit card bill or loan EMI payment by less than 30 days. So, if you forget to pay a bill, make sure to pay it within 30 days to avoid damaging your credit score.
Even if your bill/EMI is more than 30 days late, you will face negative consequences such as
Late payment penalties
Interest rates on credit cards are increasing.
Delay of 30 days
If you have a 30-day delay on a regular basis, it will affect your credit score. If this is your first time delaying a loan EMI or credit card bill, the lender may be sympathetic, especially if you have previously paid on time. As a result, a single 30-day payment late will have no impact on your credit score. If it happens frequently, however, it can lower your credit score by up to 100 points, dropping it from excellent to good, good to fair, and so on.
60-day waiting period
A 60-day delay in your credit card bill/loan EMI can hurt your credit score significantly. Because most lenders report to credit bureaus every 30 days, it will appear on your credit report.
90-day Waiting Period
If you haven’t paid an outstanding credit card bill or loan EMI for more than 90 days, it will appear on your credit report as a non-performing asset (NPA) (Non-Performing Asset). It’s worth noting that different lenders have different NPA criteria. A 90-day late payment is considered an NPA by some, while a 120-day delay is considered an NPA by others.
A late payment on your credit report will likely stay on your report for seven years, affecting your loan eligibility and interest rates in the future.
More than 120-day delay
The late payment has been marked as “collection” on your credit report. This has a major impact on your credit score, causing it to plummet even more.
More than 120-day delay
The late payment has been marked as “collection” on your credit report. This has a major impact on your credit score, causing it to plummet even more.
Steps to avoid late payment
If you have a credit card or a loan, you must keep track of the due date and make every effort to pay on time to avoid paying a late fee. Here are some suggestions to keep you from falling behind on your payments.
Select the option for automatic debit: Auto debits are useful for people who forget to pay their bills on time. Autopay is the process of authorizing your credit card issuer or lenders to deduct the outstanding balance or the minimum amount from your bank account automatically each month. You will no longer have to worry about remembering to pay your bills on time.
Set up recurring reminders: Setting up reminders rather than relying on your memory is another way to effectively pay your outstanding dues on time. The best way to keep track of what you owe and when it is due is to use calendars or online reminders on your phone. You can also ask for online reminders of your payment due date from your creditors.
Weekly payments: Making weekly payments on the account is preferable to paying monthly. If you do this, you may find it easier to keep track of your overall debt and pay it off faster.
This will assist you in achieving a high credit score and prevent you from paying high-interest rates and late fees.
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