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December 23, 2025
Going back a decade, when Private Banks opened up to providing unsecured credit, the concept of credit cards and personal loans was new. Customers used credit freely, with little knowledge or discipline regarding repayment terms, taking for granted that the payments could be cleared at their convenience. They could shift from one lender to another as the data was not shared.
With the introduction of CIBIL (Credit Bureau of India Ltd), banks now report all credit and repayment transactions of borrowers to CIBIL. CIBIL maintains individuals’ and companies’ credit histories and repayment records and issues a CIBIL score. This information is shared with lenders, who assess a borrower’s current and past credit history before sanctioning credit.
The past defaults and delays may have been due to the simple shortage of funds or any other reason, which includes:
A return of the EMI due to a change of account: If your salary account changes, the Bank should be informed in advance of the shift to the ECS mandate. If the Bank is not notified in time and there are insufficient funds, the EMI will remain unpaid and will be reflected in your credit history.
Loss of Employment: If you have lost your job, the EMI will still be presented to your account on the due date. It is advisable to arrange funds from other sources and maintain a sufficient balance in your account to clear the EMI. If you have outstanding credit card debt, pay the minimum balance by the due date to avoid default.
Delay in salary credited: The EMI will be credited to the salary account on the due date. It is advisable to keep one month’s instalment as an advance in case the employer does not credit your salary on the assigned date, the EMI will be marked as unpaid.
Unable to manage finances properly: If the expenses have increased due to unplanned expenditures, and you have made extensive usage of your credit card, individuals who are unable to manage their finances in such situations are liable for default.
Clerical and recording errors: Unaware that there is an error in your CIBIL report? This may only come to light when you apply for a loan, the default error could be due to a wrong match or faulty reporting by the lender. Whatever the reason may be, this could affect your CIBIL score unless it is resolved.
Credit score drops: CIBIL updates your credit transactions and revises your score every 30 to 45 days. Lenders notify CIBIL when EMIs are credited, and credit bills are cleared. Delays, defaults, and unpaid dues are also reported. The score is revised, upgraded, or reduced based on these factors. If your CIBIL score drops below the acceptable mark, lenders may not grant you credit, or funds may be given at a higher interest rate.
The credit history cannot be changed: regardless of the reason for the EMI return or delayed payment on your credit card, it will be reported to CIBIL. The return of EMI on your home loan or personal loan will always be reflected in your track record and cannot be mitigated. It will remain in your history.
Excessive bounces will result in a denial of further credit. When you apply for a Personal loan or a home loan, your credit history will reflect the repayment history of your existing and used loans. If your EMI has been returned unpaid and/or delayed, an infrequent bounce can be overlooked, but a continuous string of defaults or delays is cause for concern.
Credit cards overdue: Your credit card balance must be repaid on the due date; any outstanding balance will incur interest of 36% to 42% annually. The balance owing on your credit cards will reflect in your CIBIL history. If it is above the permitted limit, you will be denied further credit due to overleveraging.
Collection and legal action: Continuous non-payment of your EMI or credit card bills will invite reminders by the lender. If they remain unpaid, collection agents will contact you to resolve your overdue unsecured credit, such as credit cards and personal loans. At the same time, legal action can be initiated for mortgages that include home loans and auto loans.
Other effects: The CIBIL score is now recognised as an essential benchmark not just for issuing financial products, but also as a personal assessment of an upright and responsible individual. If you have a good CIBIL score, it will not only make it easier to get credit when required but also open many doors at the professional level.
Reset of your Credit records: You cannot change your past credit history as recorded by CIBIL, but you can always work at making a fresh start. If you have defaulted, settled, or have a record of delayed payments, the CIBIL now removes the details of the negative records from your history after 7 years. This does not mean that your debt has been cleared, but it gives you a chance to rebuild your score.
Try to clear the previous debt: If your financial situation improves, it is the best solution to repay the amount due and clear your debts. Repaying the amount owing with interest will close the account and have a positive effect on your CIBIL score, while not paying the interest due will mark the status as settled. A settled account will deny you further credit from the lender and hamper your CIBIL score.
Restart your history with commodities: Landed with a poor CIBIL score, do not wait until your need for a loan gives you stress. Start rebuilding your score by purchasing commodities with your Credit or Debit card, convert the spend into EMI, and make sure you repay the instalments on time.
Apply for a secured credit: a Gold Loan or a Loan Against Property, which requires a lower CIBIL score due to the security provided, can help you get the finance you need and improve your CIBIL score. A personal loan against a fixed deposit amount with a Bank is also issued for emergency needs.
Look for a successful relationship: A lender with which you have a salary account, with a good average bank balance, or have an existing or closed credit card or loan with an on-time repayment track, can issue you further funds based on the same. Your CIBIL score may be overlooked as you have maintained a good repayment record with the lender.
In conclusion, it is not just your CIBIL score that the Bank considers when issuing you credit; your credit history is also taken into account. If you miss a payment, try to clear the amount as soon as possible, as the repayment period is also mentioned in the credit records. Managing your finances well and making arrangements in advance to cover shortfalls and pay your credit dues on time is the roadmap to maintaining a sound credit history.
