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Impact on CIBIL Score Due to Delayed EMI Payments

By Finserv MARKETS - Apr 23,2020
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Impact on CIBIL Score Due to Delayed EMI Payments

CIBIL stands for Credit Information Bureau (India) Limited. The company collects and maintains credit records of individuals as well as commercial entities in India. This includes borrowing and payments related to loans and credit cards. CIBIL has a record of every individuals’ loans and credit card payment history. More often than not, most of us underestimate the importance of timely payments of loan EMIs and, therefore, end up paying our bills past the final date of payment. This kind of behavior does not go well for you in terms of your financial discipline in the long-run and has a negative impact on your CIBIL score.

A CIBIL score is one of the important parameters a lender checks to determine an individual’s ability to repay a loan or ascertain his creditworthiness. Before offering you a loan the lender will run a check on your credit report and score. If your score is low the lender will see you as someone who is not responsible for their finances and payments and will consider you as someone who is not creditworthy.

With the advent of credit bureaus such as CIBIL, the delayed payments of your bills at your own peril. There are several factors that can have a negative effect on your CIBIL score including the frequency and severity of late payments.

What is a good credit score?

CIBIL score ranges from 300 – 900, having a higher score makes you more eligible to get a home loan. Usually, a credit score in the range of 650 to 850 is considered as a good score by the banks and will help you get a swift approval on loan. Anything lower than 550, will strongly curtail your chances of getting a loan approved.

Credit Scores:

  • If the applicant has a score above 760 means Excellent Credit
  • If the applicant has a score above 700 means Good Credit
  • If the applicant has a score above 640 means Fair Credit

Effects of Delayed or default in payments

Delayed payment is reflected on your credit report and overall brings down your credit score. A payment delay decreases your overall credit worthiness. This might result in rejection of loan applications, the credit card companies might also reduce your credit limit if the credit score is low. Credit card companies would run a check on your credit history to ensure that your payment record is clean before they offer you higher credit limits on your card.

Minor and Major Defaults in EMI payments

Payments delayed or missed for a period of less than 90 days are considered minor payment defaults. As a result, your credit score does take a permanent beating but is affected temporarily, as you can always work on improving your score by practicing disciplined payments. However, if you fail to make your EMI payments beyond 90 days, your account falls under the NPA (non-performing assets) category. In case of major defaults such as this, lenders would be hesitant to even consider your application for a loan.

Both major and minor defaults affect negatively on the loan eligibility of the borrower. In case of a minor default, you can work on improving your credit score by making timely repayment of loan EMIS. There is a view that a single payment delay will not have a negative impact on your CIBIL credit score provided you can make up for the time lag. However, it all boils down to the timing and the frequency of your missed payments. A couple of missed payments may only affect your score for a short period but if you don’t plan on paying the missed payment for six months and apply for a loan, your chances of getting your loan approved and availing a loan is quite low.

Improve Your CIBIL Report

You need to keep checking your CIBIL Report and watch out for any inaccuracies in it. Sometimes these reports contain incorrectly stated open accounts that may increase your credit exposure. It’s a good habit to keep monitoring your report so you are well aware of your score analysis, credit history, and trends. If you plan on closing a credit card account, make sure you get a no-objection certificate (NOC) from a credit card provider.

Credit cards are closed only after a NOC is received from the bank. By checking your credit Report on a regular basis you will be able to boost your credit score and fulfill all your financial goals and dreams.

If you wish to apply for a personal loan and are looking for a reliable loan service provider. You can apply for loan at Finserv MARKETS and avail benefits like quick disbursement, low EMI, minimal documentation, and a host of other features. The personal loan application process is quicker and simpler, your loan gets approved within minutes and the amount gets disbursed in your bank account within 24 hours! Also, read how you can avail a personal loan with low CIBIL score only at Finserv MARKETS.

Check CIBIL Score

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522