ATM :: Small Mistakes That Can Hurt Your Cibil Score | Updated On: October 11, 2014 22:39 (IST) | NDTV Profit


Many of us often take payments for granted once we have achieved a healthy Cibil score. But credit score algorithms do not understand human nature. To demystify this concept, discussed here is the impact of a small payment miss on your Cibil score.

Nikhilesh Yadav, a New Delhi-based accountant was living a contented life. He had recently bought a three-bedroom apartment in an upcoming locality close to his office. It accommodated his family along with his parents. He had a mid-sized car and was contemplating buying a big car after getting an annual raise, which came along sooner than expected.

Mr Yadav’s Cibil score was around 750 points on a scale of 900 the last time he had checked while buying his first car a couple of years ago. When he decided to apply for a loan to buy a bigger car, he was in for a huge shock. He was informed by his bank that his application was rejected because of a low Cibil score and a couple of negative remarks in his credit report.

He immediately pulled out his personalised Cibil score and found his score to be around 610. He had delayed a couple of his car loan EMIs and a couple payments relating to his credit card.

Delayed or missed payments get reported on your credit report by the lenders and have a negative impact of pulling down your Cibil score. Lenders often prefer a healthy credit score from their prospective borrowers.

Here’s a table to give you an idea of percentage of new loans sanctioned to people with different credit scores:

Credit score Percentage of new loans sanctioned
<650 4.70%
650-699 5.20%
700-749 9.70%
750-599 22.80%
>=800 57.60%

It is very clear that people with higher Cibil score stand a higher chance to get a loan. Also, it is important to understand that as risk-based lending is kicking into the Indian market, people with higher credit scores also stand a chance to get loans at a lower rate of interest.

So, after Mr Yadav studied his personalised credit report from Cibil, he realised his mistake. He had forgotten to deposit cash in the account from where his car loan EMI was made. This happened a couple of times. He had also delayed 3-4 credit card payments.

It is important to live a financially disciplined life. It is very difficult to assess how much of a drop in credit score you could expect because of a single missed payment. One could expect a drop of 50 to 100 points in such a case.

Today, Mr Yadav is working towards improving his credit score. He has understood that all he needed was a little bit of financial discipline. Now, he keeps reminders on his phone to make payments on time.

Hence, it is important to live a financially disciplined life.

Disclaimer: All information in this article has been provided by and NDTV Profit is not responsible for the accuracy and completeness of the same.

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