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A credit score is a score calculated by credit bureaus that denotes an individual’s creditworthiness. DPDs (Days Past Due) are mentioned in a credit score report when the EMIs or loan installations are overdue. The DPDs should ideally be at ‘0’, denoting that all loan repayment installations have been paid on time.
Let’s cover the basics of credit scores and then move on to DPDs in a credit report.
How is a Credit Score Calculated?
A credit score is calculated based on a variety of factors which include how many loans have been taken in the past, whether they have been paid off on time, and also the amount of credit that has been utilised. A credit score range is between 300-900, in which anything above 700 is considered as good.
Why is a Credit Score Important to Lenders?
Credit scores are used by lenders to best understand if an applicant will be able to repay their loan in a timely manner. A credit score represents the ability of the applicant to repay the loan and helps the lender understand the risks that come with lending to the applicant.
When an applicant’s credit score is high, they have a positive history of repaying loans, EMIs, and credit card bills on time. This makes them an ideal applicant to lend to. A high credit score also leads to the applicant getting a better interest rate for their loan and favourable terms in the loan as well.
A CIBIL credit score report has a few important sections other than the score itself. Other than the score, the account information section and DPD (Days Past Due) component is also important. This article dives deep into what DPD is and how it can impact credit scores.
What is DPD and Why is it Important?
The DPD or Days Past Due component of a CIBIL Credit Report shows how consistent an individual has been in repaying their loan EMIs or instalments. If there have been any lags in the repayment process, the DPD component also shows how many days the repayment has been delayed by.
DPDs negatively affect credit scores and it is important to pay EMIs on loans in a timely fashion in order to avoid them. A bad credit score can have many repercussions:
1. Limited lenders give money to loan applicants with a bad credit history
2. Some lenders ask for mortgages when an applicant has a bad credit score/history
3. Applicants with bad credit scores get loans at higher interest rates and with unnecessary terms
How Does DPD Affect Credit Scores?
The presence of DPDs on a credit report results in a lowered credit score. It reflects that the applicant does not make loan payments on time. For lenders, this is flagged as a liability and makes the applicant a risky individual to lend money to. In the future, this means that lenders will put the applicant through a more rigorous process when they apply for a loan.
It is important to read through a credit report carefully to ensure that all the information is correct and up to date. In the case of errors in the credit report, steps can be taken to rectify the same.
How to Rectify Errors in a Credit Report
First, it is relevant to mention where one can check for DPDs in their credit report. DPDs are mentioned in the ‘payment history’ section of a CIBIL report. The number of DPD days is mentioned against each of the loans taken. Ideally, the DPD days should be 0.
If there are any errors in a credit report, they can be reported on the CIBIL website. Following the complaint, CIBIL reaches out to the lender against whose loan there is an error, and requests verification about the same. Once the error has been rectified, an updated report is shared with the applicant.
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Propelld offers private loans for education for students looking to study at the college of their dreams. These 100% digitised, collateral-free loans take into account the applicant’s academic past and future along with their credit history.
To maintain a good credit score, it is important to pay all EMIs on time and clear any dues to avoid hassles in the future.
