Be it an electricity bill or a credit card’s bill, most people end up missing on-time bill payments and end up paying past the due date. Unlike electricity bills, credit card bills can have significant financial effects, if repayments are missed or delayed.
Whatever be the reason, lending institutions will de-rate you as a customer if you miss your credit card payments. Moreover, credit bureaus like CIBIL regularly monitor an individual’s financial discipline. CIBIL summarises this information into a 3-digit credit score.
How a missed payment impacts one’s credit score
Credit Information Bureau India Limited or CIBIL gathers and maintains an individual’s payment history related to loans and credit cards. CIBIL collects the details from various financial institutions in India. They prepare the person’s credit report, scoring him/her on the scale of 300 – 900.
A CIBIL score of 750 and above signifies the respective individual is creditworthy and has repayment capability. Naturally, a score below 750 indicates payment failures, inability to repay, and all such odds. Note that 35% of the score is made up of one’s payment history.
So, even a single missed payment of your credit card can decrease your credit/CIBIL score significantly.
How can a poor CIBIL score affect you?
Once your CIBIL goes down due to a failed credit card payment, here is how it can affect you:
Low chances of availing credit in future
Lending institutions consider the CIBIL score as one of the foremost credit card eligibility criteria. They use your credit report to evaluate your repayment capability and decide on whether to sanction the credit or not. Hence, a low CIBIL score (below 750) reduces your chances to avail credit cards or loans in the future.
Pay higher rates of interest
Under some conditions, lenders may approve you credit but with a higher rate of interest. You may also have to pay other additional charges as lenders consider you as a high-risk borrower.
Additionally, you may have to abide by stringent terms and conditions.
Prevent you from receiving special offers
Besides credit card eligibility, having a healthy CIBIL score entitles you for many special offers. For example, one of the top-most NBFCs in India, Bajaj Finserv provides with pre-approved offers on credit cards and many other financial products and services.
Also, you can enjoy comparatively low-interest rates.
How to avoid missing your credit card payments?
Where there’s a problem, there’s also a solution. You can follow certain ways to avoid credit card payments and being a defaulter.
If you tend to forget
Choose the auto debit option
Go for the auto debit facility if remembering the due date is difficult for you. It debits the due amount from your account on a particular date of every month. This reduces your hassle as well as consumes less time.
However, make sure to check the statement and verify if there is a sufficient amount in your account.
Pay at the earliest
It’s always better to clear the bill immediately after receiving the statement instead of waiting for the due date. This decreases your chances of missing the payment.
If you are in short of sufficient cash –
Convert your due amount into easy EMIs
In case the full bill payment isn’t possible, convert the amount into easy EMIs. Although this may reduce your credit limit, it’s a better alternative than to default.
However, this facility is offered by selected lenders like Bajaj Finserv. The Bajaj Finserv RBL Bank SuperCard comes with industry-first features which allow you to divide dues of more than Rs. 3,000 into EMIs.
Pay the minimum bill amount
Again, clearing the minimum amount due instead of the total due during financial crises can prevent you from paying additional interests and penalty charges.
Above all, you must keep track of your credit card’s usage and have a repayment plan beforehand to avoid being a credit defaulter.