If you are in a dilemma, that whether a Gold Loan or normal credit affect your Credit Score, you first need to understand what is credit or loan. A credit or a loan is financial help that lenders give you with a trust of receiving it back in time. And credit score is a reflection of how well or responsibly do you handle your credit and your credit payments. So to the questions, if whether a gold loan or a credit influences your credit score the answer is YES.
Handling your credits responsibly and making the credit payments on time can increase your credit score showing your efficiency in handling. But on the other hand, negligence of any sort in loan payments will hurt your credit score and subsequently dim your chances of getting any loan in the future. If you want the credit facility to be available for you at all times, handle it carefully and responsibly.
To do so, you need to understand the different ways in which a gold loan can affect your CIBIL credit score.
Gold Loan Payments
Also regarded as a prime factor, making payments of the loan in time is something a lender expects. Meeting such loan obligations will affect your credit score in a good way and will boost your score substantially. If one is not meeting such obligations on time, it can also affect your credit score adversely.
This is how gold loan can affect your credit score:
Regular payments
Making loan payments at the time and even before the deadlines is essential in building a good credit score. Borrowers who pay their loan EMIs on time are considered as responsible credit users which makes them more attractive as a borrower than a person who is irregular at making their loan payments.
Lenders also prefer giving gold loans to borrowers who display responsible credit behavior, aka a good Credit Score.
Loan Default
A Loan Default is when you fail to meet the gold loan repayment obligation as per the loan contract with the lender. Even a day’s delay in making the payment can adversely affect your credit report. The delay is also reported to all credit bureaus, who then add the information to your credit report, thus reducing your credit score substantially.
Likewise, delaying the payment for 30 days attracts late payment fees and maybe a few other nominal charges. But defaulting for consecutive 90 days will get you NPA (Non-Performing Asset) label on your credit report. The title represents your in-efficiency in handing credit and bars your chance to get a loan from other lenders. Further non-repayment of the loan can get you a legal notice and auction of your pledged gold articles in the lieu of the gold loan.
Conclusion
So now you know in what ways a gold loan can influence and affect your credit score. Multiple loan inquiries can adversely affect your credit score and regular loan payments can boost it.
As far as loan defaulting is concerned, it depends on various consequences. The specifics of these consequences differ from one case to another. But on the whole, while defaulting loan you can expect damage to your credit score along with fewer chances of getting credit in the form of a loan or a credit card. It can also attract you a legal notice, late payment fees, penalties and even auction of your gold articles.
If you are a busy person and suspect that you might miss the due date of your loan payments, set a reminder on your computer, mobile. Setting a reminder can help you in maintaining a healthy payments record and thus keeping your Credit Score healthy.