Payment History - How it Affects Your Credit Score

A good credit score leads to easy loan and credit card approvals. If your credit score is 750 or above, banks won’t hesitate to offer you a loan at competitive rates. So, how do you hit that mark? Ultimately, it all boils down to making timely payments. If your payment history is good, you don’t have to worry much about getting any form of financing.

However, a few missed payments can damage your credit score. Let’s break it down for you a bit.

What is a credit payment history?

In a nutshell, your payment history is a record of all your past and present payments made to your lenders. It includes all the data regarding your on-time, late, and missed payments. This helps the lender to gauge you as a borrower. Your payment history plays a key role in determining your overall credit score. So, remember that any unpaid bills reflect on your payment history, which in turn may affect your final score.

How can I see my payment history?

Your lenders will report your monthly payments to the major credit bureaus, including TransUnion Credit Information Bureau (India) Limited or CIBIL, Credit Rating Information Services of India Limited (CRISIL), and Equifax, to name a few. What you need to do is request a free copy of your credit report from any of these agencies. You may have to fill in forms to get access to your report. It’s recommended that once you get the report, review it thoroughly to see if there are any discrepancies. If there’s any inaccurate information recorded, you can request a dispute form from the agency. However, to be on the safer side, request the form within 30 days of getting your report.

How is my payment history recorded?

As mentioned earlier, your lenders will send a detailed summary of your monthly payments to the credit bureaus. This will also include your missed or late payments (if you have any). Note that each agency has a different way of computing the credit score and the final score may vary from bureau to bureau.

How is my payment history related to my credit score?

Credit agencies use various parameters while computing your score. This may include your payment history, any unsettled debts, the timeline of your credit history, and account inquiries, to name a few.

Your creditors will report any late payments or missed payments made to the bureaus. This will get recorded in your repayment history and can hurt your overall score for years. Also, if you have been a serial defaulter, expect your score to be on the lower side. Credit bureaus consider multiple factors before deciding on the final score. So, even you have paid your bills on time, but violated any of the other parameters, your final score may still take a hit.

How can late payment hurt my score?

Your Credit Information Report contains the details of your account information, including the status of your account. I you haven’t paid your outstanding credit card bills for over 180 days, the lender will write-off the amount and report the same to credit agencies. Also, you should be aware of your DPD or Days Past Due. For instance, if you haven’t paid your unsettled bills for over 90 days, your account will be classified as “Sub-Standard”, which may bring down your credit score quite a bit. If your account stays as “Sub-Standard” for 12 months or more, it will be classified as “Doubtful”. This can damage your score further.

How do I keep my payment history clean?

Keep paying your dues on time to keep your payment history stain-free. You can also set monthly reminders, if that makes the job easier for you. It could happen that you forget the due date. In such cases, signing up for autopay may work. Just ensure that you have sufficient funds in the account that’s linked to the autopay facility. Try to keep a tab on your expenses. This will help you manage your debts in a better way.

FAQs On Credit Payment History

  1. What is a good payment history?
  2. Timely payments will always have a positive impact on your payment history. If you have paid all your bills on time and much before the due date, you can expect a clean payment history, which in turn will help boost your credit score.

  3. How long does payment history affect credit score?
  4. This depends on various factors, including the number of late payments, amount you owe, and how late your payments were (usually payments made after 90 days), among others. If you have been a serial defaulter, the black mark will reflect on your report for at least 7 years. In cases of bigger financial fiascos, such as bankruptcy, can leave negative impact on your score for at least 10 years.

  5. How can I write off late payments from my report?
  6. You can write a goodwill letter to your creditor depending on the relationship you have. If your lender agrees to adjust, your report won’t reflect the late payment. Alternatively, you can file a dispute in case you see any discrepancies in the payment data.

  7. What process should I follow to get my credit report?
  8. You can write to any of the major credit bureaus requesting them to send your credit report. If you specifically want to check your credit score, you can do that on third-party websites like BankBazaar.

  9. What should I do if I know that I am going to make late payments?
  10. That’s not a good situation to be in. However, to retain some of your credibility, you can inform your creditor about your financial crisis and give them a particular date within which you will pay the amount. Alternatively, you can make partial payments, only if your creditor allows you to do that. By doing this, you are taking responsibility of your situation, which in turn may work in favour of you.

Practice paying on time so that your credit history doesn’t take a hit. That way, you can put your name in the good books of financial institutions. Also, spend less using your credit cards, so that the debt accrued is on the lower side.

News About Payment History - How it Affects Your Credit Score

  • Credit Rating Agencies under Sebi Scanner After IL&FS Fiasco

    As per reports, Sebi may take action against a number of credit rating agencies, entities, top management officials, and auditors who were associated with IL&FS. The Securities and Exchange Board of India (Sebi) has been probing the role of several top-level management personnel, entities, and agencies involved in the multi-crore IL&FS scam that took the industry by storm, hurting the interest of minority stakeholders. The probe begun last year following huge defaults recorded by several entities amounting to Rs.90 crore. The capital market regulator is also looking into the alleged involvement of several borrowers who were given loans despite recording defaults earlier.

    Other than Sebi, the matter is being probed by several other agencies, including the Serious Fraud Investigation Office (SFIO). As per reports, SFIO has also found involvement of former L&FS top management auditors and directors. It’s being reported that several IL&FS group entities were given higher ratings from various credit rating agencies. It’s being speculated that the top management of IL&FS were aware of this situation but turned a blind eye and continued to roll out fresh loans Investigations have also found that several entities from the IL&FS group continued to enjoy high ratings from various rating agencies, including due to window-dressing of the books of the companies and ever-greening of their loans.

    18 June 2019

  • YES Bank Long Term Credit Ratings Downgraded by India Rating

    Credit rating agency India Ratings has downgraded the long-term credit rating owing to concerns of some of its loan exposure turning into bad loans. The latest downgrade comes only days after ICRA slashed the private sector bank’s tier-I bond rating from "AA-" to "A" and tier-II bonds from "AA" to "AA". India Ratings has downgraded the YES Bank’s long-term rating to ‘IND AA-’ with negative outlook, while reaffirming short-term rating. As per India Ratings, the material improvement in the operating performance and strengthened capital levels could lead to a revision in the outlook to stable.

    Along with the tier I and tier II bonds, ICRA also downgraded six instruments with a total borrowing of over Rs.33,000 crore. As a result of the downgrade, the shares of YES Bank fell about 2.5% to Rs.157 on the BSE during the early morning trade. The share price of the bank has slipped more than 30% in the last 15 days. The private lender had also reported its maiden loss of over Rs.1,506 crore in the March 2019 quarter, driven by a near 10-fold spike in provisions.

    9 May 2019

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