Credit and loans are an integral part of modern-day life. From car loans and personal loans to housing finance, several different loan products exist to make our lives easy. However, to get access to these loan products and on favourable or agreeable loan terms and conditions, having a good CIBIL score is crucial. The CIBIL score is the credit rating given to credit users by TransUnion CIBIL.
This credit rating provides an estimation of the credit user’s attitude towards loan repayment and whether or not they can be trusted with timely payment of loan EMIs. The impact of a CIBIL score on home loans is massive — a good CIBIL score can help loan applicants get approved easily and also negotiate for a higher loan sanction and a lower home loan interest rate. Consequently, those planning to get a housing loan must maintain a CIBIL score above 750. One of the factors that has a direct impact on people’s CIBIL score is DPD or Days Past Due.
What is DPD or Days Past Due?
If you have ever accessed your CIBIL report, you must have seen the term ‘Days Past Due’ written on it. What is DPD full form and DPD meaning in home loans and its impact on CIBIL score.
All loans are repaid through EMIs. When a loan applicant borrows money, the loan agreement clearly states the date on which they must pay their loan EMI each month. Similarly, each credit card also has a set due date before which the credit card user must clear the total amount pending. DPD or Days Past Due refers to the number of days that have passed since the last due date. To elaborate on this, with an example, if you are currently repaying a home loan and the days past due column on your credit report reads 30 days, it simply means that 30 days have passed since your last due date to pay your home loan EMI.
The number mentioned in the DPD column is important and has a direct impact on your CIBIL score. It is reflective of your creditworthiness, repayment capacity, and dedication towards clearing debt on time. A high number under this column indicates an irresponsible attitude towards debt repayment and therefore, people with a high DPD have a low CIBIL score, which in turn, mars their capacity to access loans in the future.
How Often Does TransUnion CIBIL Update DPD on the CIBIL report?
TransUnion CIBIL updates DPD on the CIBIL report every time a financial institution sends data to TransUnion CIBIL. Usually, this happens once a month. For instance, if you missed paying a home loan EMI, the DPD column on your CIBIL report will read 30. Now, even if you clear the EMI the next day, the number under the DPD column will change only next month, when TransUnion CIBIL will receive fresh data from all financial institutions. If you do not clear the loan EMI before the next due date, the DPD column will then read 60.
A clean repayment history is one of the most crucial things that helps build a strong credit rating and get access to credit easily. Borrowers must, therefore, make it a habit to pay all their loan EMIs and credit card bills on time. In the next section of this article, we look at the other things that loan borrowers can do to build a strong CIBIL score.
Simple Tips on How to Improve CIBIL Score to Secure a Lucrative Home Loan
1.Lenders do not like lending money to individuals who are excessively dependent on credit. Lenders study the hard inquiries under a borrower’s name and their credit utilisation ratio to analyse their relationship with credit and their dependency on it. To improve your credit score, it’s essential to maintain a high CIBIL score by keeping your credit utilisation ratio below 30% and minimizing hard inquiries.
2. Individuals who have a mix of both secured and unsecured loans have a higher CIBIL score than individuals who have only one type of loan. All credit users must make sure to avail of both secured and unsecured loans as it demonstrates their ability to handle all types of debt.
3. Lastly, the age of one’s credit history also has a direct impact on their CIBIL score. The older a person’s credit history, the better will be their CIBIL score. Borrowers are thus asked to never close old loan accounts and credit cards.