Maintaining a healthy credit score is important for securing loans and credit cards at favourable and easy interest rates. Still, missing even a single EMI can immensely impact your credit score in a negative way.
Potentially dropping it by 100 points or even more. That is why understanding how to deal with this kind of damage is essential for your financial stability.
What is the impact of missed EMI payments on your credit score?
A single error or a missed Equated Monthly Instalment (EMI) on your credit card can lead to a substantial decline in your credit score. Do remember, payment history accounts for about 35% of your credit score, thus making timely payments critical for your overall credit profile.
For example: A 30-day delay in EMI payments can result in a decline of 75 to 100 points depending on your credit history. Now, the more recent the default the greater the impact on your credit score.
How to fix a damaged credit score?
To repair your credit score after a missed EMI, follow the steps given below:
- Verify accuracy: Check your credit report and your over-all credit profile very carefully for any discrepancies or errors and dispute incorrect entries promptly.
- Contact your lender: Prompt communication is key here. Always reach out to your lender as soon as possible. Explain the entire situation honestly and ask about goodwill adjustments. This might help in removing late payment remarks.
- Prioritise timely payments: Once you have reached out to your lender and put in a request for leniency treatment. Post the same, strictly ensure that all your future payments are made on time this will help in demonstrating responsible credit behaviour. Further, if possible set auto pay for all future payments so that you strictly ensure that there are no missed payments in the future.
- Monitor your credit score: Now, as you have tried to bring things back under control, go ahead diligently and regularly check your credit score. Ensure that your credit utilisation remains in check. This is important to track improvements and to maintain a healthy credit profile.
Preventing future missed payments
Simply put, your creditworthiness is your integrity. That is why preventing future EMI delays is extremely important to maintain a good credit profile and a consistently optimum credit score. Strictly consider setting up automatic payments or alarms to ensure that you never miss a payment in future again.
Further, also keep in mind that you need to maintain a low credit utilisation ratio along with avoiding multiple loan applications for years together to depict responsible credit repayment behaviour. As do note, behaviour in credit profile management is more important than words.
Conclusion
Therefore, missing an EMI can significantly impact your credit profile. Still, proactive measures can help in mitigating the damage immensely. You should also consider reading about simple concepts such as: personal loans, credit cards, credit scores etc., to keep yourself updated with the most recent information.
This will help you in understanding the consequences of late payments at a deeper level and taking prompt steps to rectify them. Hence, by following these simple steps individuals can protect their financial integrity and maintain a healthy financial health. These ideas will surely help the borrowers in availing credit at competitive rates.
