Does Penal Interest Impact CIBIL Score? Awareness on Late Fees and Credit Health

Penal interest is an additional charge levied by lenders when borrowers miss their EMI payments or delay them beyond the due date. This penalty is not just a financial burden but also a potential threat to your credit score.

When you miss a payment, it is reported to credit bureaus, such as CIBIL, as a "Days Past Due" (DPD) entry. This entry reflects your repayment history and can lower your credit score significantly. A lower score can affect your ability to secure loans or credit cards in the future.

For Bajaj customers, it is essential to understand that while penal interest is a financial penalty, its real impact is seen in how it is reported to credit bureaus. The 2026 RBI guidelines emphasise that lenders must report overdue payments within a 30-day window, making it even more crucial to address missed payments promptly.

Awareness: How ‘Days Past Due’ (DPD) appears on your Bajaj statement

When you miss an EMI payment, your Bajaj statement will reflect a "Days Past Due" (DPD) entry. Here is what you need to know about it:

• DPD Definition: This term indicates the number of days by which your payment is overdue. For instance, a "30 DPD" means your payment is 30 days late.
• Impact on Credit Report: A DPD entry is directly reported to credit bureaus and can lower your credit score.
• How It Reflects on Bajaj Statements: The DPD status is updated on your Bajaj statement, which you can access via the Bajaj My Account portal.
• Importance of Timely Action: If you notice a DPD entry, it is crucial to clear your dues immediately to prevent further damage to your credit score.

Penal charges vs. penal interest: Which one hurts your score more?

While penal charges are a one-time fee, penal interest compounds over time and has a direct impact on your credit score. This makes penal interest more detrimental to your financial health if left unaddressed.

It is important to understand the distinction between a late fee and a CIBIL score impact.

• Late Fee: This is a penalty amount charged by lenders for missing a payment deadline. It does not directly affect your credit score unless the payment delay exceeds 30 days.
• CIBIL Hit: If a payment is overdue by more than 30 days, the lender is required to report it to credit bureaus. This results in a "30 DPD" mark on your credit report, which lowers your score.

For Bajaj customers, the 30-day window provided by the RBI guidelines is a critical period to make good on overdue payments and avoid a negative impact on your credit score.

Warning for existing customers: The cost of a 'technical' EMI bounce

A technical EMI bounce occurs when your payment fails due to reasons like insufficient funds or incorrect account details. Here are some key points to consider:

• Immediate Penalty: A technical bounce often incurs a penalty fee, which is a financial burden.
• Impact on Credit Score: If not resolved within the 30-day window, it could result in a "DPD" entry on your credit report.
• Prevention Tips: Ensure sufficient funds are available in your account before the due date and verify account details to avoid technical errors.

Recovery roadmap: How long a penal interest entry haunts your report

If penal interest has already impacted your CIBIL score, here is how you can recover:

• Timely Payments: Consistently paying your EMIs on time is the most effective way to improve your credit score.
• Monitor Your Credit Report: Regularly check your CIBIL report to ensure all payments are updated and there are no errors.
• Build a Positive Credit History: Use credit responsibly to demonstrate financial discipline.
• Seek Professional Guidance: Consider consulting a financial advisor to create a repayment plan.