Credit ratings can and do suffer as a result of late repayments. Potential lenders will evaluate your previous financial behaviour to forecast your future behaviour. If you have made late repayments or missed payments, they may interpret this as a sign that you can't be counted on to make consistent and timely payments, which could influence your application for financial products in the future.
Making a late payment on a credit card, or loan can lower your CIBIL credit score and have a negative impact on your credit health. Whether you are six days late or 30 days late, not repaying your bills on time can have a long-term impact on your personal finances.
When banks and potential lenders evaluate your credit risk and decide whether or not to accept your application for credit, one factor they analyse is your payment history. A long history of on-time payments indicates that you have a good relationship with lenders as a borrower. A bad credit history of on-time payments may indicate that you will have difficulty repaying your loan.
What are the Effects of Missing Payments?
Being inconsistent with payments raises red flags for credit card companies, lenders, and paying late can result in a variety of consequences.
1. You end up hurting your CIBIL credit score
Even if you miss the deadline for a single time, it will reflect on your CIBIL credit report and a few points will be taken off your CIBIL credit score. Payment history is a significant aspect in determining your credit scores. Your credit score might be lowered by just one late payment. Ensure that you make all the repayments on time and in full to improve your CIBIL credit score.
2. You may be charged a late payment fee
If you pay your credit card bill one day late, you may be charged a late fee on your credit cards, which will appear on your next billing statement. You may be charged extra late fees if you continue to miss the deadline. Also, the same will get registered on your CIBIL credit report that, will hurt your eligibility while applying for a loan or credit card.
3. You may not get the best loan rates
Late payments to creditors may result in you being offered a higher interest rate on a loan. Also, when you have a low CIBIL credit score, there is a chance that your loan application may get rejected altogether.
What to do if you have Missed a Repayment?
If you have past due bills, the sooner you pay them, the better. The longer you go without making a repayment, the more damage it will do to your CIBIL credit score. If you have missed a payment, you could try to:
1. Create a repayment plan
If you have missed a series of payment deadlines in the past, it’s high time for you to work on a repayment plan. Create a budget and stick to it if you have issues with managing money that led you to miss the repayment date. If you have a problem with remembering the payment dates, set up auto debit. That way, you do not have to make the repayments on your own. It will be automatically debited from your account.
2. Request your credit provider for removal of the late fee
If you have a valid explanation for the late or missed payment, you can get the late payment fee waived by your credit card company. However, keep in mind that the lender may or may not agree to it. Approach your credit card company or lender only if you missed the payment deadline due to genuine reasons.
Your CIBIL credit score reflects your borrowing patterns and ability to efficiently handle debt. If you have a low CIBIL credit score, it could indicate that you have had trouble managing your bills in the past. However, a low CIBIL credit score can also be caused by a lack of borrowing history. A poor credit score can make it more difficult for lenders to approve your loan applications.
Despite the importance of your CIBIL credit score, lenders are usually more interested in your complete credit history. Before finalising whether or not to lend to you, lenders consider a variety of factors. This could include the types of debt you have had in the past, how successfully you managed them, and how much debt you currently owe.
They may also look into any credit you have. If a lender finds on your credit record that you have skipped payments or struggled to pay on time in the past, they may be concerned that you will do the same after borrowing money from them. Hence, keep up with your repayment dates.