Not only defaults, even late payments can have a significant adverse impact on your CIBIL score, since it is a measure of your creditworthiness. Your CIBIL score is calculated based on a number of factors such as payment history, credit utilisation, length of credit history, new credit inquiries and types of credit accounts.
Late payments indicate to lenders that you may be a higher credit risk because you have not been able to meet your financial obligations on time. In case you happen to miss a payment deadline, it usually gets reported to credit bureaus such as CIBIL, and this information can stay on your credit report for several years.
Severity of impact
A single late payment can cause a temporary drop in your score, while multiple late payments or consistently late payments can result in a more significant and longer-lasting negative impact.
In addition to lowering your CIBIL score, late payments can also make it harder for you to qualify for new credit in the future and may result in higher interest rates when you do get approved.
Therefore, it’s crucial to always make your payments on time to maintain a good credit score and financial health. If you’re having trouble making payments, consider reaching out to your creditors to discuss options for repayment or financial assistance.
Frequently Asked Questions:
Do late payments affect your CIBIL score adversely?
They can have significant effect on your score significantly since the score is a measure of creditworthiness.
What are the factors that determine the severity of the impact?
The severity of the impact depends on factors such as how late the payment was, how frequently you have been late and the overall health of your credit history.
ALSO READ: What’s the difference between CIBIL score and credit score? MintGenie explains
What is the long-term solution of poor credit score?
While it may not be an immediate solution, working to improve your credit score over a period of time can raise your chances of procuring loans with better terms in the time to come. For this to happen, one has to start making timely payments, reducing outstanding debt, and avoiding new credit inquiries.
How does skipping a deadline get reflected in the credit score?
When you miss a payment deadline, it usually gets reported to credit bureaus such as CIBIL and the information can stay on the report for a long period.
What are the key factors which determine CIBIL score?
The CIBIL score is calculated based on various factors, including your payment history, credit utilisation, length of credit history, types of credit accounts, and new credit inquiries.
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Published: 07 Mar 2024, 02:28 PM IST