Understanding the Damage
The convenience of BNPL services on e-commerce sites and food delivery apps has made them immensely popular across India. What many users don't realise is that these small, seemingly harmless transactions are now treated as formal credit. Thanks to recent
RBI guidelines, most BNPL providers are required to report your payment history to credit bureaus like CIBIL. This means every BNPL purchase, whether it's for a new smartphone or a grocery order, is essentially a small-ticket personal loan on your record. A missed payment, even on a small amount, signals to lenders that you may be unable to manage even minor debts, which can significantly lower your credit score. In fact, because payment history accounts for a large portion of your score, a single BNPL default can sometimes cause a more substantial drop than a missed EMI on a larger loan.
Your Immediate Action Plan
The first step toward repair is damage control. Start by getting a clear picture of your financial health. You are entitled to a free credit report annually from bureaus like CIBIL, Experian, or CRIF High Mark. Scrutinise this report for any errors or inaccuracies, such as a payment marked late when it was made on time. If you find discrepancies, file a dispute immediately. Next, identify all outstanding dues, especially on BNPL accounts, and prioritise clearing them. Contact the lenders to understand the total amount owed, including any late fees or penalties. If you're struggling to pay the full amount, some lenders might be open to negotiating a settlement or a structured repayment plan. Clearing these dues is non-negotiable, as they continue to suppress your score while they remain unpaid.
Habit 1: Automate to Ensure Timeliness
Your payment history is the single most influential factor affecting your credit score. The most effective habit to build is ensuring you never miss a due date again. The simplest way to achieve this is through automation. Set up auto-debit mandates for all your recurring payments, including BNPL instalments, credit card bills, and EMIs. This can usually be done through your bank's net banking portal or directly within the payment apps themselves. By automating payments, you remove the risk of human error or forgetfulness. For added security, set calendar reminders a few days before each due date to ensure your account has sufficient funds for the transaction to clear. This simple, one-time setup creates a powerful system that works in the background to consistently build a positive payment history.
Habit 2: Control Your Credit Utilisation
The second most important factor in your score is your credit utilisation ratio (CUR)—the amount of credit you use compared to your total available credit limit. Lenders prefer to see a low CUR, ideally under 30%. Juggling multiple BNPL accounts can make your total debt climb quickly, making you appear credit-hungry and high-risk to lenders. To build a habit of healthy utilisation, first consolidate your spending. If you use multiple BNPL apps, try to clear the balances on all but one and close the extra accounts. Make it a routine to pay down your balances before the statement date, not just on the due date. This helps keep the reported balance low. Another strategy is to request a higher credit limit on your existing cards, which can instantly lower your utilisation ratio, provided your spending remains the same.
Habit 3: Monitor and Maintain Regularly
Credit health isn't a 'set it and forget it' activity. It requires regular attention. Make it a habit to check your credit report at least a few times a year. This helps you track your progress and catch any fraudulent activity or reporting errors early. Furthermore, resist the temptation to apply for new credit frequently. Each application triggers a hard inquiry, which can slightly lower your score. Limiting new applications demonstrates financial stability. Finally, keep older credit accounts open, even if you don't use them often. The length of your credit history is a contributing factor to your score, and older, well-managed accounts show a long-term record of reliability.
