Have you ever wondered why people keep saying, “Pay your credit card bills on time”? It is not just about avoiding late fees or extra interest. It is also about keeping your credit health in check. In India, your CIBIL score plays a big role in how banks and lenders see you. This score is like a report card for your financial behaviour. A good CIBIL score can help you get loans easily, while a low score might make things difficult. But how exactly do your credit card bill payments affect this score? Let us break it down in simple words.
What Is a Good CIBIL Score?
The CIBIL score ranges from 300 to 900, where:
- 750 and above → Considered excellent; high approval chances for loans/credit cards
- 650 – 749 → Good; lenders may approve but at higher interest rates
- 550 – 649 → Fair; lower chances of approval and higher risk perception
- Below 550 → Poor; difficult to get credit approvals
Since lenders prefer applicants with a CIBIL score of 750+, maintaining a good score is essential for accessing credit on favourable terms.
The Importance of Paying Credit Card Bills on Time
Credit bureaus like CIBIL generally recommend paying your credit card bills in full by the due date every month. Paying the minimum amount due is not enough—you should clear the entire outstanding amount. This practice signals that you can manage your credit well.
If you miss payments or delay them frequently, it raises questions about your repayment capacity. Consequently, your credit score takes a hit every time you default or are late on credit card payments. Typically, the higher the number of defaults and delays, the greater the impact on your score.
How Payment Delays Impact Your Score
Let’s take two individuals, Amit and Priya, to understand how late credit card payments affect their CIBIL scores.
Scenario 1: Amit Pays Late Once
Amit has a CIBIL score of 780. He forgets to pay his ₹10,000 credit card bill on time and clears it 10 days after the due date.
- He incurs a late fee and interest.
- His credit card company reports the late payment to CIBIL.
- His CIBIL score drops slightly to 765.
While one late payment does not cause major damage, repeated delays can reduce his score further.
Scenario 2: Priya Defaults for 3 Months
Priya has a CIBIL score of 720. She misses her ₹25,000 credit card bill payments for three consecutive months.
- Her bank reports her account as “30, 60, 90 days overdue.”
- Her CIBIL score drops drastically to 650.
- She now finds it difficult to get a personal loan or a new credit card.
As you can see, the longer the delay, the worse the impact on your score.
How to Recover from Payment Default
Generally, time helps in recovering your lost credit score after defaults or delays. As you begin paying your credit card bills on time, your score starts improving gradually. However, it takes consistent good payment behaviour over many months to negate the negative impact.
In addition to making timely payments, you can request your lender to report your updated payment status to credit bureaus. This can quicken the recovery process. Limiting your credit card expenses and maintaining low outstanding balances also demonstrates responsible behaviour.
In certain cases, you can negotiate with your lender to settle outstanding dues on mutually agreed repayment terms. If the restructuring helps you pay off historical bills, it can contribute positively to your credit profile.
Best Practices to Follow
Here are some prudent practices to adopt for managing your credit card payments:
● Set payment reminders to avoid missing due dates
● Review billing statements regularly and address discrepancies
● Pay more than the minimum amount due whenever possible
● Maintain credit utilisation usually under 30%
● Build an emergency fund to tackle financial shocks
● Inform your lender immediately in case of temporary payment difficulties
● Review your credit report annually for errors or discrepancies
Following these practices diligently can help minimise irregular payments. Consequently, you can maintain a healthy CIBIL score in the long run.
Conclusion
Your credit card payment history significantly influences your CIBIL score. Typically, late payments and defaults hurt your credit score due to the negative perception of repayment behaviour. However, with time and consistent on-time payments, you can gradually recover your lost score. Building healthy financial habits is key to effectively managing your credit cards and maintaining a high CIBIL score. This helps retain access to future credit at good terms.
