How a single late payment can decimate your credit score

livemint.com:

A man named Syed was flying overseas for a holiday when bought a book for ₹250 at the airport using his credit card. His credit card bill was generated while he was abroad, and soon they payment was due. But Syed couldn’t access his payment gateway while abroad and missed his payment.

What a seemed like a small miss had serious consequences. His credit score fell from 844 to 776 in the first month. He returned to India and paid his dues along with a penalty of ₹300 plus interest and GST. Despite this, his score fell another 49 points to 727 the next month. That single late payment had taken 117 points off his credit score.

Also read: Large banks see deposit, credit slow down from March, smaller peers better off

But Syed’s troubles didn’t end there – he had been looking to take a home loan. With a credit score of 844 he would have bagged a ₹50 lakh loan at 8.60%. But at 727, the best rate got was 9.30%. The difference in the interest due over 20 years was ₹5.40 lakh. While Syed could refinance to a lower rate once his score improved, he was stuck with the higher rate until then.

Nowadays, interest rates on loans are closely linked to your credit score. It’s thus important to know what your score is and to how keep it healthy.

You can ensure your credit score is healthy only if you know what it is and how it’s trending, so make sure you track it every month. There are four credit bureaus in India, all of which update your credit history once a month. You can download a free full credit report from each bureau once a year, under the RBI’s rules. Some fintech companies offer unlimited free checks.

Also read: Doctor wins ₹2.6 lakh compensation: Why regularly checking your credit score matters

But what’s a good credit score?