A CIBIL report or history is an important factor to get the loan sanctioned. Most loan lenders only offer loans to the borrowers with high CIBIL score as it shows the borrower is responsible and creditworthy. A credit or CIBIL report also depicts the financial behavior of the borrower.
Having said that, there are several factors that affect the CIBIL report. One among the same is the late payment of dues. Late payment of dues affects negatively on the payment history which is an integral part of the credit report. Now, a lot of people wonder how the late payment affect credit report and therefore, CIBIL score.
Late payment of dues and CIBIL score go hand in hand. How late payment will affect the CIBIL report depends on several factors. First being how many days the payment is late. In case the borrower has missed the payment by one day, there is no need to worry. In most cases, the lenders do not report the late payment to the CIBIL account until it is more than 30 days past due date.
For example, the credit card payment is due on 13th April and the cardholder pays it on 20th April. Since the payment is late, the cardholder will be charged late fees and interest. But the creditor will not report this to the credit reporting agencies, such as Trans Union. However, the creditor will only let go this if the cardholder is paying dues on time.
How much can it Affect?
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Generally, late payment of dues between 30 days and 60 days do not cause lasting damage to CIBIL score. Once their payment is done, they are not reported to the CIBIL report. However, such frequent delays have a negative impact on the credit report. A missed payment for more than 90 days can be very harmful for the credit report. Its impact can go up to seven years.
This will make the borrower being viewed as a repeat offender. In addition, this makes him a risky borrower for creditors if the payment is delayed for 90 days. Let’s take look at the summary of late payments in depth:
- 30 Days Late: A 30 days delay will not cause lasting damage on the CIBIL score. However, if it is frequent, it will damage the credit score.
- 60 Days Late: A 60 days delay will also not cause long-term damage to the CIBIL score. But it will damage the score is it is too often.
- 90 Days Late: This hurt the credit history very badly as such its impact can last up to seven years. If the borrower has missed the payment once, it is considered that he’s likely to do it once again. So, the scores will drop.
- 120+ Days Late: At this point, the outstanding debt is usually sold to a third-party collection agency or is charged off. This occurrence is reported to the reporting agency and the credit score will reduce.
How to Ensure no Payment is Missed?
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Keeping the importance of paying debts on time in view, it is important to find ways of making the payments on time. Read on to know few tips for the same:
Reminders: Reminders are one of the best ways to pay bills on time. Instead of entirely relying on the memory, the borrower can simply put a reminder on his phone or calendar about the payment of dues. Both the mediums are the best way of keeping track of dues.
In addition, lenders these days provide online alerts or send a message on the registered number about the due date of the payment.
Auto Pay: The borrower can sign-up for auto pay. It can be beneficial for borrowers who often forget to make the payments. In the auto pay method, the payment is automatically deducted from the authorized bank account or credit card on the due date.
However, the important point here is to ensure that there is sufficient balance in the account prior to the due date on which the amount will be withdrawn. In case there is no enough fund, then the borrower may have to pay late fees along with the amount to be paid.
Weekly Payment: The borrower can also choose for weekly payment instead of paying on monthly basis. This will help in easy handling and maintaining the balance and pay off the loan a bit faster.
Now that you know how the late payments can affect CIBIL report and the ways to ensure timely payment, you can achieve excellent CIBIL score.