Impact of late payment on Credit Bureau Scores

Parth Pande, CEO, Finance Buddha

A credit score is a statistical indicator of an analysis of a person's capacity to pay back loans based on his credit history. Financiers like banks and financial institutions use this score to assess a borrower's repayment history.

There are many key things to a good credit score: Timelines of Repayment,  Quantum of Credit, Nature of Credit and Overall Performance on all the credit lines secured by the customer.

No lender likes to lend to someone who has a history of defaulting on loan repayments. People who default on loans are categorized in to major defaulters and minor defaulters. Minor defaults are the payments that are delayed or missed less than 90 days. Such defaults are called minor defaults because lenders believe that such a default can be cleared. But if someone delays the payment beyond 90 days or the account has become a NPA (Non Performing Asset) or if the property has been repossessed or there are loan write off or settlements in CIBIL credit file, then such cases are considered as major defaulters.

Late payments and non-payments will negatively affect your credit history and decrease your credit score. Failure of payment on time or nonpayment is the indicator of your carelessness about the sincerity of paying back the money you have borrowed. It also gives the impression that you may not have the capacity to payback the debts. It is quite dangerous situation for individuals to be in.

Impact of Late Payment on CIBIL:

Avoiding the Issue of Late Payments

Unless you are regular with your payments, it is highly likely that your credit score will be low and you will be denied fresh loans. As a credit card or personal loan holder you should know that all your transactions are getting reported to the bureau and your credit record is liable to get affected if you do not repay on time. So, clear the full credit card or loan installment before the deadline.

by, Parth Pande, co-founder & CEO, Finance Buddha