A good CIBIL score is influenced by a number of factors, including the frequency and severity of late payments, which raises the question: does every missed payment harm your score? Most of us, however, underestimate the value of timely payments and, as a result, pay our bills after the due date. In the long run, not only does this reflect badly on your financial discipline but also lower your credit score. This is why it is crucial to remember that any missed payments will appear on your credit report, negatively affecting your CIBIL score and making it more difficult to qualify for the best terms and interest rates on loans and credit cards you might want to apply for in the future.
That’s why it is said that late payments and your credit score are closely tied. Let’s go through a comprehensive summary of the impact of late payments on your credit score:
When you’re less than 30 days late:
You’ll have to pay a late charge and perhaps a higher APR, but if you pay within the first 30 days, it won’t affect your credit score.
When you’re 30 days late:
If you have this record on your credit report too often, it will hurt your credit score. A single 30-day late payment will not have a long-term negative impact but a payment that is more than 30 days late often might lower your credit score by 100 points.
When you’re 60 days late:
A single late payment, even after 60 days, has no long-term impact on your credit score. However, if you do it frequently, it will harm your credit score.
When you’re 90 days late:
Your credit score will be harmed for up to seven years as a result of this record. If you have missed a payment in the past, you are more likely to do so again. Your credit scores will suffer as a result.
When you’re 120+ days late:
Your debt is often “charged off” or transferred to a third-party collection agency at this stage. Both events will be documented on your credit report, lowering your credit score even further.
Want to Avoid Late Payments? Try these Tips:
- Opt for Auto-debit Option
If you’re having trouble keeping track of your credit card payments, you might want to opt for auto debit instead. To minimise late payments, you can give your bank a standing order to debit the credit card bill amount on a specific date.
- Set Reminders & Alerts
Another approach to stay on top of your payments is to set up SMS or email reminders. This way, you won’t forget to pay. To be extra sure, you may set reminders on your phone’s calendar.
- Monitor Your Credit Report
There may be inaccuracies on your credit report relating to your credit accounts. Therefore, checking and monitoring your credit report on a regular basis will help you identify any discrepancies that there might be. It also assists you in keeping track of your credit score. You may improve your credit score by addressing the areas where you are deficient.
While it takes years to create a good credit history, it only takes a few incidents or slips, whether deliberate or not, to ruin it. Financial vigilance and discipline are essential for keeping a good CIBIL score as credit checks have become more important in the Indian financial sector for evaluating a person’s credibility. Following a routine & staying careful can help you build a strong credit score and keep you from incurring excessive interest rates and late fees.