A CIBIL score is a three-digit number ranging from 300 to 900 that tells lenders how good you are at borrowing money and paying it back. Maintaining a good CIBIL score is crucial as it reflects your creditworthiness, directly influencing your ability to secure loans and credit cards. A high CIBIL score can lead to better interest rates and favourable terms, making financial management more efficient and cost-effective. You can consider it as a score for how responsibly you've handled your money in the past. But, just like any score, there are ways to lose points. Missing an EMI, which stands for Equated Monthly Installment, is one of the quickest ways to watch that score drop.
In this article, we will discuss the impact of an EMI default on your CIBIL score and provide insights into a common concern, which is whether checking your CIBIL score can affect it. You will learn how to maintain a good financial reputation and keep your CIBIL score in check.
Before we explore how a missed EMI affects your EMI CIBIL score, it's important to understand the types of defaults. Defaults are categorised into two types: minor and major, and both can have different consequences on your EMI default on CIBIL score.
Make sure to keep the following pointers in mind to improve your CIBIL score after a default:
Understanding how missed payments affect your credit score is crucial, especially if you're considering a home loan for CIBIL defaulters or worried about how EMI affects your credit score. It's a significant factor; your repayment history makes up 35% of your CIBIL score.
Tabled below is a simple breakdown of the impact of delayed EMI payments on your CIBIL score:
Impact On Your CIBIL Score
There is little to no impact, as credit bureaus are likely not updated with minor payment delays.
A noticeable drop in your score, since credit bureaus are informed of delayed or missed payments within this timeframe.
More than 90 Days
Being marked as a defaulter, your score could decrease rapidly, affecting your creditworthiness.
While a single late payment may not significantly damage your credit score, consistently missing payments, even a few, can temporarily cause a drop in your score. However, if you allow a payment to remain overdue for more than six months, the effect can be much more severe. Such a mark on your credit history may make lenders hesitant to approve your loan application, considering the risk your profile poses.
Staying informed about your credit score is a responsible financial practice. Regularly checking it is a "soft inquiry," leaving your score unaffected. This knowledge empowers you to track your financial health without impacting your creditworthiness. Being aware of your credit status allows you to catch potential issues early, maintain financial stability, and make informed decisions when applying for credit. It's a proactive step towards financial responsibility and smart money management.
However, it is important to know your credit score as it is one of the responsible financial behaviors.
Maintaining a good EMI CIBIL score is essential for financial health. Whether it's a minor slip or a major stumble, any default on CIBIL score can have lasting effects on your ability to borrow in the future. Being diligent with EMI payments is key to avoiding the pitfalls that can bring down your score. And if you're ever in doubt, remember that checking your score is a harmless step in the right direction—it doesn’t cause any damage.
For more insights and tips on managing your credit score and navigating loans, we encourage you to visit IIFL Home Loans. There, you can find a wealth of articles that can help you keep your financial reputation in good condition.
A CIBIL score is a three-digit number that lenders use to evaluate how likely you are to repay loans. It ranges from 300 to 900, with higher scores being better.
Yes, an EMI default does affect your CIBIL score. A single missed payment can lead to a temporary dip in your score, but consistent defaults, especially over 90 days, have a more severe and long-lasting impact. These major defaults can negatively affect your credit score for up to seven years. Hence, it's crucial to manage EMIs effectively to maintain a good credit score.
Yes, there are minor defaults (missed payments for less than 90 days) and major defaults (missed payments for more than 90 days), both affecting your score differently.
It's difficult, but not impossible. There are specific products like home loans for CIBIL defaulters, but they may come with higher interest rates.
No, checking your own CIBIL score is a soft inquiry and does not affect your score. Only hard inquiries by lenders can impact your score.
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