How paying EMIs on time boosts your credit score

Missing or being late with a single EMI can lower your score by 50-100 points, depending on the length of time it is unpaid.

Your credit score reflects your capacity to repay the money you have borrowed and nothing defines it like your payment history. Timely payment of EMIs is one of the simplest and surest ways of creating a healthy credit score. Each timely payment adds to your creditworthiness, whereas each delay leaves an irreversible impression, which takes a few months to lose its significance.

Why payment history matters most

Credit agencies like CIBIL and Experian lay heavy stress on payment history — around 35 percent of your score depends on it. Paying your bills on time month after month sends the message to lenders that you can handle debt responsibly. Missed EMIs, however, show up immediately as "delays" or "defaults," which bring down your score even if you've been diligent otherwise.

Impact of one missed payment

Missing or being late with a single EMI can lower your score by 50-100 points, depending on the length of time it is unpaid. Defaults are reported by lenders in every 30-day period, and once reported, they stay on your report for up to three years. Ongoing delays are a sign of financial hardship and make obtaining new loans more challenging or more expensive.

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Automatic payments can help

Automating EMI payments so that you never miss a due date is the best possible way to make timely payments. Every bank and loan app offers facility of auto-linking repayments to your salary account. Just make sure you have enough balance — defaulting auto-payments are no different from delayed payments.

Advantages of timely EMIs in the long run

Timely payments not only improve your rating but also make lenders believe in you. This, over time, can result in lower interest rates, higher credit card limits, and faster approvals on new loans. If you ever need to refinance or consolidate debt, a clean history of payments works quite nicely in your direction.

The takeaway

Timely payment of EMI can be a habit, but it is the building block of a good credit score. Treat each timely payment as your vote in favour of your creditworthiness. Maintain a discipline, remember your due dates, and your credit score will always act in your favour.