importance of repayment history

Why your repayment history is as important as your credit score?


Credit in the form of credit cards and loans are gaining importance, as the demand for these products has soared over the last few years. This is quite expected given the inflation in the economy – it is sometimes difficult to make ends meet on a monthly basis, let alone keep an emergency fund. Also, with the advent of information technology and exposure to varied technological advancements, it’s quite difficult to keep oneself away from the high-end consumer products such as smart TVs, mobiles and other appliances. An instant personal loan can be a fitting solution to satisfy many of life’s demands and pleasures.

Since the presence of credit in our lives cannot be wished away, it’s time to make peace with it. The presence of a good credit score is the key to managing this beast. While a good credit score ensures affordable loans and manageable interest rates, the importance of a decent repayment history cannot be undermined. Your repayment history gives an insight to lenders as to how you manage your monthly repayments, and whether or not you are reliable and creditworthy.

What is repayment history?

Various lenders, credit card companies, and banks share your account information with credit bureaus on a pre-agreed basis. The credit bureaus consolidate this information and generate reports, popularly referred to as the repayment history, and assign scores based on it. They track your payments on a regular basis- all payments, late payments and missed payments are taken into consideration. It is not surprising that the repayment history makes the biggest impact on your credit score. 35% of your credit score is based on this single factor.

How lenders view your repayment history?

Lenders can view the payments history when they request a “hard pull” of your credit profile. Lenders, especially those giving out unsecured personal loans, need credible individuals who have diligently made repayments. This is the reason why your promptness in making repayments can have a positive influence. The presence of late or missed payments will definitely give out a negative impact and so the importance of making payments on time every time cannot be undermined.

Impact of missed payments

An instance or two of the missed payment or late payments do not have a noticeably big impact on your credit score. However, a delay of more than 3 months can have a significant impact that can take years to recover from. So next time you take a quick cash loan, make sure you know the impact of missed repayments.

Tips to improve and maintain your repayment history

Many times, something as simple as forgetting to make payments can cause you to not just pay late fees but can also have a detrimental impact on your credit score. Here are some points to help you maintain a good repayment history and a healthy credit profile:

  1. If you have many loans, consider consolidating all under one loan account. This can help you keep track of the due date and make prompt payments.
  2. The Autopay facility available with all banks can be put to good use. This can help relieve you of the need to remember dates to make payments.
  3. If you are unable to make payments or know in advance that the next payment will not be made- make sure to inform your lender. An honest and open approach with a situation appraisal will be a good move.
  4. There are no hard and fast rules regarding early payments. If you have cash before the due date, make the payment.
  5. Most lenders will send you an email or SMS notification regarding your payment well in advance. Be sure to keep an eye for those and mark your calendar so as to not default on payments.


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