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Making minimum payments on your dues usually does not have any major effects on your CIBIL Score. If you just pay the minimum due amount by the set date, your payment is considered on time. Thus, your CIBIL Score is not affected. Let's understand how paying minimum due affects your CIBIL Score with an example.

Minimum Due Payments on Credit Card Bills

Let’s say, Mr. Raj got a credit card bill of ₹15,000 for the month of May. The minimum payment to be made is ₹5,000, as set by the card issuer. So, he paid just ₹5,000. The remaining ₹10,000 is carried forward to the next month with an extra interest charge levied on it. 

 

Now, let's assume that the interest charged is 20%. This means that 20% of ₹10,000, which is ₹2,000, is added to the outstanding bill amount. Thus, the amount to be paid becomes ₹10,000 + ₹2,000 = ₹12,000, which is now payable in June. Because he has paid the required minimal amount before the due date, it is considered to be on time. So, there is no impact on Raj's CIBIL Score.

Impact Over a Long Term

Now, let's say Mr. Raj got a bill of ₹20,000 for the month of June. His total liability becomes ₹20,000 + ₹12,000 = ₹32,000. Again, he can either make a minimal due payment, pay over and above the minimal due, or close the balance. The billing cycle continues depending on the choices Mr. Raj makes.

 

Credit card issuers usually report your balances each month to credit bureaus. This information is generally considered by the credit bureaus when calculating your score. Over a long period of time, this habit of paying only the minimum amount due shows your inability to manage your credit. It further leads to an increase in the credit utilisation ratio. This is due to the accumulation of credit over time. All of this can lead to a drop in your CIBIL Score.

Most finance experts suggest that you should strive to keep your credit utilisation ratio under 30%. Having a higher ratio can lead to a significant drop in your CIBIL Score. So, consider paying the minimum amount due when you face a financial crunch.

Checking Your Dues

A good way to check your payment dues and their impact on your credit score is to check your credit reports. The reports consist of details of your active credit cards, and loan accounts, like the outstanding amount you need to pay. Monitoring your payments and the credit report can be a great way to ensure that you maintain a good score.

 

As per RBI, all credit bureaus in India must provide one free credit report to all citizens, every year. This makes it easy for you to access your credit-related data. Gain insights from these reports and create effective financial strategies. You can also get a customised credit health report powered by TransUnion CIBIL on the Bajaj Markets App. Utilise this facility, build your score, and manage your repayments easily.

Frequently Asked Questions

What happens if I only pay the minimum amount due on my credit card?

If you pay only the minimum amount due on your credit card by the payment due date, your payment will be considered on time. Thus, your credit score will not be affected directly. However, if you consistently pay only the minimum amount due, your credit will keep accumulating. This may lead to an increase in the credit utilisation ratio, negatively impacting your CIBIL Score.

What is the ideal credit utilisation ratio that I should maintain for a good CIBIL Score?

It is usually recommended that the credit utilisation schedule be maintained below the 30% mark. This enables you to avoid any negative impact it may have on your credit score.

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