How BNPL Quietly Hurts Your Credit Score
Many consumers don't realise that BNPL services function as short-term credit. Under RBI guidelines, every BNPL transaction is essentially a small personal loan provided by a partner bank or NBFC. These lenders are required to report your payment behaviour,
including late payments, to credit bureaus like CIBIL. A single missed payment, even by a few days, can be reported as a default, potentially lowering your score by a significant margin and staying on your report for years. Unlike a credit card's minimum due, a full BNPL instalment is expected, and failing to pay it on time is what triggers the negative reporting.
Step 1: Get Your CIBIL Report and Assess the Damage
Before you can fix the problem, you need to understand its scope. Your first action is to get a copy of your latest CIBIL report. You are entitled to one free report annually from CIBIL and other bureaus. Carefully review the 'Accounts' section. Look for entries from the NBFCs that power your BNPL apps (the name might not be the app's brand name). Identify which accounts are marked as 'late', 'settled', or have a 'Days Past Due' (DPD) number other than zero. This gives you a clear list of the problem accounts you need to address.
Step 2: Clear All Outstanding Dues Immediately
There is no path to repairing your score without first clearing your debts. Pay the entire overdue amount to the BNPL provider at the earliest. A 'settled' status, where you pay less than the full amount owed, is still viewed negatively by lenders and will continue to suppress your score. Your goal is to have the account status updated to 'Closed' or 'Paid in Full'. Even after you pay, the historical record of the late payment will remain, but clearing the due stops any further damage.
Step 3: Obtain a No Objection Certificate (NOC)
Once you have paid the dues in full, your job isn't finished. You must proactively contact the BNPL provider or their lending partner and request a No Objection Certificate (NOC). An NOC is a legal document confirming that you have cleared all dues and the lender has no further claim against you. This certificate is your crucial proof of closure. You may need to provide your ID proof and loan account details to get it. Some lenders send it automatically, but many require a formal request. Do not skip this step.
Step 4: Update Your CIBIL Report
Often, there is a lag between you closing the loan and the lender updating the credit bureau. Sometimes, they fail to update it at all. After receiving the NOC, wait for about 30-45 days and check your CIBIL report again. If the account still shows as 'Active' or 'Settled' instead of 'Closed', you must act. You can raise a dispute directly on the CIBIL website. In the dispute form, you will need to state that the loan is closed and upload your NOC as proof. CIBIL will then contact the lender to verify and correct your report. This process can take up to 30 days.
Step 5: Rebuild Your Score with Good Habits
Fixing the incorrect entry is a major victory, but rebuilding your score is a marathon, not a sprint. The impact of a past late payment diminishes over time as you build a new record of positive behaviour. Focus on paying all future bills, including credit cards and any other loans, on time without fail. Keep your credit utilisation ratio low, ideally below 30% of your available limit. Avoid applying for multiple new loans or credit cards at once, as each application results in a hard inquiry that can temporarily lower your score. Patience and consistency are your best tools from here on out.
