Finding a loan with a poor credit score can often be a herculean task, if not impossible. The banking sector is already under the burden of a large number of bad loans and the lenders are now more prudent than ever. So, it's natural to be worried if you have made one or more late payments of credit cards bills and/or EMIs recently.
Late payments are not good for your free CIBIL score- there are no two ways to it. However, at the same time, it's important to learn how they actually make an impact, especially considering that there are many myths surrounding the same.
The following are 6 most common myths related to late payments that you should know of:
A large number people still believe that one late payment doesn't make a difference in your credit report. However, this is not true.
When it comes to credit score calculation, every single payment matters. Although the amount of damage a single late payment does may vary from one credit rating agency to another, there is usually at least some amount of damage one way or another.
There are many factors that affect the impact of a single late payment. For instance, if you had made another late payment in the recent past, then the damage would be more. Similarly, if you have made late payments in other accounts as well, then again, the impact would be greater.
While it's important to pay your credit card bills and loan EMIs on time even if late, lest your name should end up on a loan defaulter list, doing the same doesn't actually solve the problem completely.
Whenever there is a delay is a payment, the lender reports the same to their credit bureau who, in turn, puts the same in the credit report. So, while you don't have any financial obligations to the bank, your report is marred.
Fortunately, you can have the remarks of late payments removed from your report by contacting your bank and requesting them to strike these off on the basis of goodwill. Although there is no guarantee that they will comply.
It's a common misbelief that the number of times you have delayed payments is irrelevant to the calculation of a free CIBIL score.
People think that whether you make one late payment or three, it makes no difference as late is late. However, nothing could be further from the truth.
The number is important and there are two main factors- the number of late payments, and the gaps between these payments. So, the higher the number and smaller the gaps, the greater the damage.
It's true that most lenders give you up to 30 days to make a late payment before they report the same to the credit rating agency. However, that's not always the case.
Your lender may report a late payment even if you are late just by one day. It mainly depends on your credit history and how stringent they are with their loans.
If you have been late with the payments on a consistent basis for a long time and/or made it to the loan defaulter list, then your lender may step in and offer account settlement. If you accept it, you can close the ledger by paying only a portion of the balance. However, this greatly damages your CIBIL report which is why it must be avoided at all costs.
If you have taken a joint loan with your spouse or a family member, then you both share the liability of the repayment. In other words, even if you are paying your share of the EMIs on time but your co-borrower isn't, then not only their CIBIL report will be affected, yours will too.
Payments when delayed can be really bad for your credit health. Thus, always be sure to pay your bills on time and check your report frequently.