Your CIBIL report is a significant factor when applying for and securing credits like a loan or a credit card. It is a record of your credit history and score, essential for loan evaluations by banks and NBFCs. Among the various significant terms, there is a crucial term called Days Past Due (DPD) in the CIBIL report, which needs to be understood for better financial understanding.
DPD in the CIBIL report implies the number of days a borrower has delayed repaying credit obligations. Understanding DPD is essential, as it reflects your credit behaviour and adherence to payment timelines. Regularly checking your CIBIL Score allows you to monitor DPD, ensuring financial responsibility and enhancing your creditworthiness.
What is DPD?
DPD is a simple measure in the world of credit, implying the number of days a borrower falls behind on loan EMIs or credit card payments. Simply put, it measures if you have been quick or delayed in meeting your payment deadlines. Lower DPD values signal timely payments, which is ideal for maintaining a healthy credit profile.
Conversely, higher DPD values indicate delays or defaults, potentially casting shadows on your credit scores and loan eligibility. DPD is your credit report's timekeeper, influencing your financial reputation. Opting for lower DPDs becomes the basis for a robust credit standing and smoother financial journeys.
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How to calculate DPD?
DPD serves as the timekeeper for your credit payments, offering insight into the timeliness of your financial commitments. It is a crucial measure that evaluates your payment behaviour by assessing the time gap between the actual due date and the payment date for loan instalments or credit card bills.
To understand it better, consider this: if your payment due date is the 15th, and you settle the bill on the 17th, your DPD stands at 2. Extend the payment to the 20th, and it becomes 5. Missing a payment escalates the DPD to 15 or beyond, contingent on when the next payment is made.
DPD accounts for all calendar days, not just business days. Each day of delay, even if just one, contributes to your DPD. This information is incorporated monthly into your CIBIL report, influencing your credit score. A high DPD indicates poor payment discipline, exerting a downward pull on your creditworthiness.
If your DPD extends beyond 30-60 days, the repercussions can be severe, leading to significant credit score drops and categorisation as a default. Managing and comprehending your DPD is fundamental to nurturing a resilient credit profile and securing your financial standing.
Tips to improve your DPD
Here are the tips to improve your DPD in CIBIL.
1. Timely payments:
The cornerstone of a healthy credit profile is paying all your credit card bills, EMIs, and loan payments before or on their due dates. By maintaining a DPD of 0, you positively impact your credit score.
2. Set reminders:
Set up payment reminders via SMS, email, or apps to prevent oversights. Ensuring payments are made at least 2-3 days before the due date adds more reliability to your financial routine.
3. Budget and prioritise:
Create a budget to comprehend your income and expenses. Always prioritise paying high-value loans and credit card bills before discretionary spending, reducing the likelihood of missing payments.
4. Regular statement checks:
Regularly review your credit card and loan statements to identify errors or fraudulent transactions. Timely reporting to the bank safeguards against delays or missed genuine payments, contributing to a favourable DPD.
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Impact of DPD on your loan eligibility
While loan approval signals progress, it doesn't always mean favourable terms, especially with a risky credit history. Lenders may approve but counteract the risk by imposing a higher interest rate, elevating your repayment burden. Also, they might approve a reduced loan amount based on your repayment track record.
Additional security like gold or fixed deposits may be required, posing challenges for some borrowers. Building a robust CIBIL score with a good payment record is crucial. A strong credit history ensures access to affordable credit in the future, underscoring the need for consistent financial responsibility in securing necessary funding.
Key points to know:
- Loan approval doesn't guarantee favourable terms if your credit history poses a risk.
- Lenders may approve your application but impose a higher interest rate.
- Elevated interest rates significantly increase your repayment burden.
- Lenders might approve your loan for a lower amount than requested, limiting their risk exposure based on your repayment track record.
- Additional security, like gold or fixed deposits, may be required to secure the loan.
- Not all borrowers may be able to provide the requested additional collateral.
The way forward
A strong credit history ensures access to more affordable credit options when needed in the future. So, building a robust CIBIL report by maintaining a stellar payment record over time is essential.
Conclusion
Knowing and improving your DPD in the CIBIL report is paramount for a resilient credit journey. By adopting simple yet effective practices like timely payments, setting reminders, budgeting, and regular statement checks, you can maintain a positive DPD and foster a healthy credit score.
Practising consistency in financial discipline ensures your creditworthiness remains intact, opening doors to favourable lending terms. A mindful approach to managing your DPD safeguards your credit profile and reflects your commitment to responsible financial conduct.
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