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How Much Credit Score Will Go Down If I Miss My EMI Due to Coronavirus?

Highlights

  • If you miss EMI payments in this Coronavirus Induced #IndiaLockDown phase, how much will your credit score fall?
  • Read this post to know the same

In the latest monetary policy meet held on March 24-27 2020, the RBI has decided to give a 3-month moratorium period for all outstanding loans as on March 1, 2020. Remember, this is not an EMI WAIVER. The move is in line with the economic pressures induced by the Coronavirus outbreak. So, this could mean some savings for you on your loan and help you deal with the likely situation of less or no income. Your credit score will not reduce if you don't pay the EMI. But doing so can raise your interest liability as banks would like to cover their losses, which is likely to be the case on deferred EMI payments, by increasing the interest component of the EMI after the moratorium period gets over. So, if you have the money, keep paying to reduce your interest liability. The moratorium, which was ending on May 31, 2020, has been extended till August 31, 2020.

The tremors caused by Coronavirus is felt everywhere from the falling stock markets to the lockdown for 21 days effective from the midnight of 24th March, 2020. This has caused concerns for many including the salaried and self-employed.across the country. The possibility of delayed salaries can’t be ruled out, at the same time, self-employed businessmen won’t get the business volumes because of the lockdown. This could force payment delays from them on the loans they might have taken. The missed EMI payments will lower their credit score, which has to be around 750 to get credits in the future. But, how much will the score come down? The answer lies with the extent of delays, the type of debt you are servicing, as well as other factors. So what are you waiting for? Read on to know some vital credit score information in the #Coronavirus induced #IndiaLockDown phase.

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Extent of Payment Delays 

This is indeed the most vital factor that makes credit bureaus decide on your credit score. A table below will give you a brief of what’s likely to happen to your credit score with the delays for different periods.

Payment Delay PeriodsLikely Change in Your Credit ScoreOther Actions
0-30 DaysNo change in your credit score as credit bureaus will not get your repayment report during this period of delayYou’ll get calls or SMS from lenders asking you to pay your dues immediately
31-90 DaysThe credit score will come down as credit bureaus will get to know of the payment delaysLenders might send bank executives to your home or office to clear the dues immediately
More than 90 DaysThe score might fall rapidlyYou will be tagged as the defaulter and lenders can take legal actions to recover their money

Type of Loans 

The extent of the fall in your credit score also lies in the type of loan you are servicing. Defaults on unsecured loans such as personal loans could lead credit bureaus to decrease your credit score substantially. As these loans are not backed by any security or collateral, lenders will constantly nudge you to pay back your EMIs. Since the delay is not deliberate and is due to Coronavirus-led slowdown, you might escape legal actions from banks or non-banking finance companies (NBFCs). But they won’t relent on the calls and SMS asking you to pay the dues.

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When it comes to secured loans such as home loans and loan against property, lenders will seize your home if you don’t pay your EMIs for 6 straight months. They will put it on auction, sell it and recover the money. You will lose not only the asset but also have to settle with a very low credit score, putting your future credit aspirations at stake.

The Question Still Remains – How Much Will the Score Come Down?

Credit bureaus take into account the following to ascertain your credit score.

Credit AspectsWeightage
Repayment history35%
Amount owed by borrowers30%
Number of years servicing the debt15%
Number and amount of recent loans availed or applied for10%
Credit mix10%

You can see the repayment history and amount owed have a massive bearing to your credit score calculation. Missing EMI payments, which forms the part of the repayment history, will most likely be the case in the lockdown phase. Just hope that the poor phase subsides quickly and you pay your dues on time. Missing EMI on loans that are significantly higher in amounts can also bring down your score greatly.

Start Pulling Out Your Savings to Prevent the Credit Score Fall

Yes, the repayment problem looms large and so does the credit score fall. But, there’s a glimmer of hope if you have some reasonable savings with you. Use your savings and cut down the unnecessary expenses on entertainment and other liberties to pay off your dues on time. And when things get back to normal, start paying from your monthly incomes and maintaining a good credit score doing so.

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