A single missed equated monthly instalment (EMI) or delayed bill payment can cause a significant drop in your credit score, financial experts warn. Credit bureaus consider payment history the most critical factor in determining creditworthiness, making delays particularly damaging for borrowers across India.
Why Late Payments Hurt Credit Scores
Credit bureaus such as TransUnion CIBIL, Experian, and Equifax track how promptly borrowers meet their obligations. According to the Reserve Bank of India (RBI), payment history accounts for around 35 percent of a typical credit score.
A payment delayed by more than 30 days is generally reported, leading to a decline of 50 to 100 points depending on past behaviour. “Lenders interpret late EMIs as a sign of financial stress or poor money management,” said Radhika Mehta, a senior analyst at a Mumbai-based credit advisory firm.
Short-Term vs Long-Term Effects
Immediate Consequences
Borrowers who miss a due date often face penalty charges in addition to interest accrual. While a one- or two-day delay may not appear on a credit report, a default of more than 30 days typically does.
Long-Term Damage
Late payments can remain on credit reports for up to seven years. However, their influence weakens if borrowers build a track record of timely repayment. “The first six months after a missed EMI are crucial. Regular payments during this period can prevent long-term damage,” explained Dr. Arvind Rao, professor of finance at the Indian Institute of Management, Bangalore.
How to Fix the Damage
Pay Immediately and Communicate with Lenders
Experts advise settling overdue amounts as quickly as possible. Some lenders may waive late fees or allow restructuring if the borrower explains the situation. In rare cases, financial institutions may remove a delinquency entry following a “goodwill request.”
Monitor and Dispute Errors
Consumers are entitled to review their credit reports from bureaus. If inaccuracies are found—such as a wrongly recorded late EMI—they can raise a dispute. The Credit Information Companies (Regulation) Act, 2005 provides legal backing for correction requests.
Build Better Habits
Financial planners recommend automatic payments or standing instructions to prevent forgetfulness. Keeping credit card utilisation below 30 percent and avoiding multiple loan applications within a short period also supports recovery.
Broader Context in India
India’s household debt has been rising steadily, according to the Reserve Bank of India’s 2024 Financial Stability Report, making repayment discipline even more important. With retail credit demand increasing, late EMIs not only damage individual credit scores but can also strain the wider banking system.
Consumer advocacy groups have urged lenders to adopt more flexible repayment structures for first-time defaulters. However, banks argue that strict credit discipline is essential to maintain financial stability.
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Conclusion
Late EMIs and unpaid bills can trigger steep credit score declines, affecting loan approvals, interest rates, and even employment background checks. Although the damage is serious, borrowers can limit its long-term impact by paying overdue amounts swiftly, disputing errors, and committing to consistent financial discipline. Experts agree that while recovery requires patience, timely action makes it possible to rebuild creditworthiness within months.
