Skipping Bill Payments Can Affect Your Credit Score

As you can see in the above table, your payment history is the biggest factor that can hamper your credit score. Therefore, it is of utmost importance to make timely payments of your credit card bills as well as EMIs for loans. Late payments will immediately bring your credit score.

1. A recent CIBIL analysis revealed that a 30-day delinquency can reduce your CIBIL score by 100 points. If you delay the payment further, it will affect your score even more.
2. It must be noted that each credit bureau has its own way of calculating credit scores, therefore there is no fixed model of evaluating your credit score. A late payment can have a huge impact on a credit score from a particular credit bureau as against another credit bureau.
3. Being consistently late in paying credit card bills for a couple of months can have a huge impact on your credit score.
4. When you miss a credit card bill payment, the default remains in your credit report for 7 years. However, the impact of the late payment recedes over time
5. Late payments not only affect your credit score, but you also end up paying more money in the form of late payment fees. Your lender could also increase the interest rate on your credit which can mean you will have to pay more money.
6. Improving a credit score is not an overnight process. It requires a lot of discipline and consistency. The time needed to increase the credit score can vary from person to person and there is no definite period for it.

How to Minimise the Impact of Late Payment?

• Negotiate with your lender:In case of a late payment, you can negotiate with your lender. You can request the lender to not record the late payment and offer to settle the debt by paying the amount in full. It must be noted that there is no guarantee whether the lender will agree with your request. If you have been consistent with your payments for a long time, the lenders might consider your request.
• Dispute errors in your credit report:If there is an error in your credit report, it can bring your credit score down. In such cases, you should raise a dispute about the error with that particular credit bureau at the earliest. You can visit the credit bureau's website and follow the steps to dispute the errors. Every consumer has a right to challenge if there are any errors in their credit report.
• Continue paying bills on time:If you have missed one payment, you should not worry about your credit report. It is advised to focus on the upcoming bill payments and pay them on time going forward. You should be careful with late payments, otherwise it will be difficult to fix your credit score in the long run.

How to Avoid Late Payments in the First Place?

• Consider an auto debit option:If you are having a hard time keeping a track of your credit card payment, you can choose the option of auto debit. You can give your bank a standing instruction to debit the credit card bill amount by a particular date to avoid late payments.
• Set alerts or reminders:Another way to be prompt in your payments is to set up text or email alerts so that you will not forget to make the payments. You can also set reminders on your phone's calendar to be extra sure.
• Monitor your credit report:It is a good habit to check and monitor your credit report from time-to-time. Your credit report can have errors related to your credit accounts. It also helps you to keep yourself updated about your credit health. You can fix the areas where you are lacking thereby improving your credit score.
• Stick to a financial budget:It is important to have a financial budget and stick to it. You should control your impulse to shop and maintain a monthly budget. This will help you make your payments in full as well on time.

A good credit score can help you secure lower interest rates on loans and credit cards.

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