Your credit score is a three-digit number that represents your creditworthiness. It is used by lenders to determine whether you are eligible for credit and at what interest rate. Your credit score is based on various factors such as your payment history, credit utilization, length of credit history, and types of credit. One of the most significant factors that can impact your credit score is late payments and defaults. In this article, we will discuss the impact of late payments and defaults on your CIBIL™ credit score and provide tips to improve your credit score.
Understanding the CIBIL Credit Score System
The Credit Information Bureau (India) Limited or CIBIL™ is one of the leading credit bureaus in India. It maintains a record of all your credit-related activities, including credit card payments, loan payments, and defaults. The CIBIL™ credit score is a three-digit number that ranges from 300 to 900. The higher your credit score, the better your creditworthiness.
Your credit score is calculated based on various factors, including payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries. Payment history is one of the most critical factors that impact your credit score. It accounts for 35% of your total credit score.
How Late Payments and Defaults Affect Your Credit Score
Late Payments and Your Credit Score
Late payments can have a significant impact on your credit score. If you miss a payment due date, it will be reported to the credit bureau, and it will reflect in your credit report. The more delayed your payment is, the more it will impact your credit score. If you have a history of late payments, it can severely impact your credit score and creditworthiness.
Defaults and Your Credit Score
A default occurs when you fail to make payments on a loan or credit card for more than 90 days. Default is one of the most severe credit score factors, and it can significantly impact your credit score. A default can remain on your credit report for up to seven years, and it can severely impact your creditworthiness.
Tips for Improving Your Credit Score
If you have a low credit score due to late payments or defaults, there are some steps you can take to improve your credit score.
- Pay Your Bills on Time: The most important step you can take is to pay your bills on time. Late payments can have a significant impact on your credit score, so make sure you pay your bills on time.
- Keep Your Credit Utilization Low: Your credit utilization is the amount of credit you use compared to your credit limit. Keeping your credit utilization low can positively impact your credit score.
- Check Your Credit Report: Check your credit report regularly to ensure that there are no errors or discrepancies that could impact your credit score negatively.
- Use Credit Card App: With the help of a credit card app, you can keep track of your credit score, bill payments, and credit card utilization. It can help you to stay on top of your credit-related activities and improve your credit score.
Late payments and defaults can severely impact your credit score and creditworthiness. It is crucial to pay your bills on time and maintain a low credit utilization to improve your credit score. Using a credit card app can help you stay on top of your credit-related activities and improve your credit score. By following these tips, you can improve your credit.