Credit Card

CIBIL score plays an extremely crucial role when it is about applying for a credit option may it be a loan or credit card. Higher your credit score is, the better chances you may have for securing an approval on credit options. Note that the minimum CIBIL score for home loan, car loan, personal loan, loan against securities, or any other loan or credit product is 750 above. Holding a CIBIL score of anything below this, may either mean outright loan application rejection or approval of the loan application at a higher rate of interest to compensate for the risk of lending you the loan. Thus, it is very important for you to conduct a constant credit score check online periodically through either authentical online financial marketplaces or official CIBIL’s site. Periodic credit score check online allows you to know where you stand and what are the crucial steps you must take to improve your credit score considerably in case your score is low. So, you see, with a low CIBIL score, availing approval on time for various credits becomes very difficult. Even if a loan gets approved, you as a borrower may lose out on the benefits like the power to negotiate or avail lower rate of interest and processing charges.

There are different parameters that impact your credit score severely. These include outstanding balance, debt, missed or delayed repayments, half settled payments, etc. Here, I discussed how a missed payment can be one of the main causes of having a low credit score.

How does missed credit card payment affect your score?

A delayed or single missed repayment may have a long-term impact on your score and hurt your credibility massively. Moreover, a low CIBIL score may lead in outright loan application or credit card application rejection in times, when availing a loan is a must for you to meet your financial exigency.

A delayed or missed payment holds a long-term negative impact on credit score and might impact your credibility. Moreover, a low credit score leads to credit card or loan application rejection. In simpler terms, to maintain a strong credit score, it is important to make payments timely and adhere to all credit score basis best practices.

This can further be explained in the following –

         Severity and impact of a single missed or delayed payment is so high that you must work very hard for months, if not, to get an excellent credit score.

         Payment defaults can be classified into 2 kinds – major and minor. They can be further explained in the following ways –

Minor payment defaults happen when you delay or miss payment for below 90 days. Such defaults may be termed as minor as lenders and banks believe they may be resolved quickly. But your CIBIL score may be impacted temporarily.

Major payment default happens when you pay the credit amount but does so post 90 days. In such a case, credit score suffers as an outcome and you may lose the status of being a good debtor. Moreover, major payment defaults and low credit scores both impact the approval of credit card and loan.

It is advised that both minor and major payment defaults be well addressed and cleared as early as possible.

How can you ameliorate your credit score?

Any kind of payment default may negatively impact your credit score negatively. Having a low credit score even makes it tough to get approval for credit card or loan. Here’s how you can ameliorate your credit score –

         Be disciplined with a good credit repayment history.

         Never leave any debt as unpaid.

         Do not make multiple loan and credit card inquiries as these are called hard inquiries.

         Maintain a CUR (credit utilisation ratio) of 30 per cent or less.

         Assess your credit score at least twice every year.

         Keep your oldest credit card open.

         Resolve late payment problems as early as possible.

How can you avoid making late payments?

There are various ways to avoid late repayments. However, it is your responsibility as a borrower to follow specific practices –

         Choose the option ‘automatic debit’. This feature reduces a particular credit constituent from your bank account each month.

         Convert your outstanding balance into EMI for convenient monthly payment.

         Set up the reminders for credit due payment and payment deadlines.  

What’s the impact of missed payment on credit score?

There are various factors that impact your credit score as an individual and one such problem is missing out on paying the credit card due or loan instalment. What’s the adverse impact of missing out on payment upon your score? When you delay or miss out even a single credit card bill or loan instalment, you would notice your credit score reduces by a considerable number. Few of the major consequences are –

         Your credit score gets deteriorated if you hold a missed payment for any of your credit card or loan payments.

         Missed and late payments are reflected in your report. It is something you will want if you are planning to avail a credit card or loan in the upcoming future.

         A major impact is caused by your credit application. Missing out on payment of your outstanding loan and credit card payment even lowers your chances of availing a credit card or loan application approval.

Major and minor defaults

For you as a customer, it is very crucial to learn regarding the difference between major and minor defaults, so as to acquire better understanding regarding missed payments and their effect on your credit score.

         Minor defaults – Delayed or missed payments for a timeframe of less than 3 months is looked upon as minor default. In such a case, your credit score will be impacted permanently.

         Major defaults – At times you may fail to complete a payment beyond 3 months. In such a case, you as an individual may be tagged under a non-performing assets (NPA) group.

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