If you're a regular PayTm Postpaid user, do you ever wonder if Paytm Postpaid affects your Credit Score ? Instant credit facilities like Paytm Postpaid have become increasingly popular by offering easy access to credit for big-ticket purchases, operational expenses, and payments.
But how do such 'buy now, pay later ' services impact your credit profile? Let's try to understand this in detail. Before using them, you should check your credit score and credit report from reliable financial institutions like Shriram Finance to understand your credit health and never lag in building a robust financial portfolio.
Paytm has launched a Postpaid service in collaboration with non-banking financial companies (NBFCs), which provides short-term credit lines to customers for their online and offline spending needs. It allows users to make payments and buy products instantly without having to pay upfront, and the amount can be repaid to Paytm over the next 30 days.
While Paytm Postpaid appears useful for quick access to credit, it has an important impact on the user's creditworthiness. Like any other loan or credit card, using services like Postpaid influences your credit score and credit history as maintained by credit bureaus like CIBIL™.
In this article, we will assess how using Paytm Postpaid affects a person's credit profile. We will also look at the implications of defaulting on repayments of Postpaid credit and the resulting consequences. Analysing these aspects can provide clarity on how to use instant credit wisely.
How Does Defaulting on Paytm Postpaid Affect Credit Score?
Paytm Postpaid works on a credit limit model, where you can access instant credit up to a limit for purchases and payments. You have to repay the credit amount to Paytm within the due date, usually the 7th of the following month.
Defaulting Paytm Postpaid can have significant repercussions on your credit score. We all know that the credit score reflects creditworthiness and financial responsibility. While the specific credit score required for Paytm Postpaid isn't disclosed publicly, it's important to maintain a good credit score to be eligible.
It is a default when you cannot repay the due amount on Paytm Postpaid within the repayment deadline. Defaulting on Paytm Postpaid affects your credit score in the following ways:
- Since Paytm Postpaid is a credit facility, your usage and repayment history get reported by the partner NBFC to credit bureaus like CRIF High Mark, CIBIL™ and Experian every month.
- When you miss repayments or if there is a delay past the due date , it gets marked as a default in the credit report.
- Defaults remain on your credit report for up to 7 years and negatively impact your credit score provided by credit rating agencies.
- Your credit score can drop by as much as 100 points or more for every default, depending on your credit profile. For people with a limited credit history, the impact is even larger.
- A poor credit score depicts you as a high-risk borrower, making you not eligible for loans, credit cards, etc., from most lenders.
- You may only get access to loans at higher interest rates due to your poor credit score. The reduced creditworthiness due to Paytm Postpaid default can impact your finances negatively.
- Multiple defaults on Paytm Postpaid repayment can diminish your credit rating further, bringing it down by 300-400 points. It can severely limit your ability to access formal credit channels.
- Even after you clear your defaults and start making timely repayments, it takes a long time for your credit score to recover completely from the adverse effects of your past defaults.
Therefore, as per your statement, it is critical to make Paytm Postpaid repayments before the due date every month. Avoiding defaults ensures your credit score remains intact, and you maintain your eligibility for future loans and credit cards. Use Paytm Postpaid sensibly within your repayment capacity.
What are the Other Consequences of Paytm Postpaid Default?
Apart from the notable impact on your credit score and significantly causing a dip in your creditworthiness, defaulting on Paytm Postpaid also leads to other wrong outcomes, such as:
- Late payment fees - Paytm charges a late payment fee if you do not clear your due amount by the repayment due date. The late fees range from ₹50 to ₹750 based on your outstanding balance. With 18% GST, the overall late payment cost can be substantial.
- Account suspension -Failure to make timely payments for an extended period may result in Paytm permanently discontinuing your Postpaid account, thereby preventing you from accessing further credit through the Postpaid service.
- Lower credit limit - After defaults, Paytm usually lowers the Paytm Postpaid credit limit when you reapply for activation. It restricts your purchasing power and access to credit.
- Higher interest rates - A low credit score due to Paytm Postpaid defaults can lead to higher interest charges on future loans or credit cards. This increases your overall debt burden.
- Loan/Credit card rejection - Many lenders reject loan or credit card applications from customers having past defaults on record, irrespective of current income documents provided. Your repayment history creates a risk perception.
- Debt accumulation - If you cannot pay the missed payments, the amount due increases. This can spiral into a debt problem, badly affecting your money situation. You can also restart using PayTm postpaid after clearing your due amount.
- Legal action - In cases of significant and prolonged defaults, Paytm may resort to legal actions, such as issuing notices, engaging collection agents, and even initiating civil litigation in court to seek repayment.
To summarise, defaulting on Paytm Postpaid has the dual impact of destroying your creditworthiness and leading to punitive action if the same persists. It is essential to avoid defaulting by paying your dues responsibly before the due date and maintaining good credit health. Also, make sure you reap the maximum benefits by activating Paytm postpaid by undergoing a complete online KYC verification via a valid PAN number.
How to Use Paytm Postpaid Smartly Without Impacting Your Credit Score?
Paytm Postpaid offers convenience but requires financial prudence to avoid defaults that may hurt your credit score. Here are some tips for using it wisely:
- Activate Paytm Postpaid only if regular repayment within the due date is feasible based on your income. Do not overestimate your repayment capacity and take excessive credit limits.
- Choose weekly or two-week billing if you get income often. It will help you repay faster and reduce the outstanding balance.
- Make partial repayments even before the due date to maintain lower utilisation. Credit utilisation below 30% ensures a higher credit rating.
- Set multiple payment reminders starting 15 days before your Paytm Postpaid due date to prevent missing timely repayment.
- If unable to repay full dues, pay the minimum amount mentioned on your statement to avoid late payment penalties. But settle the remaining amount soon.
- Explore making repayments directly from your bank account using standing instructions or NACH to automate the process.
- Minimize your debt burden, it's advisable to refrain from using Paytm Postpaid for non-essential luxury expenses or when more cost-effective payment alternatives are accessible. Instead, consider utilizing Paytm Postpaid for your regular monthly spending.
- Compare charges and credit limits offered on Paytm Postpaid with other credit cards before activation to pick the optimal source of credit.
- Stay disciplined even if you earn a lot. Do not take too much instant credit just because it is easy to get.
- Keep checking your credit report from CIBIL™ frequently to ensure there are no errors or unknown defaults from your account.
Conclusion
Using Paytm Postpaid affects your credit score and report like any other credit facility. While it offers ease of instant credit, be prudent with repayment discipline to avoid defaults. Pay your dues on time and use credit limits moderately to leverage Paytm Postpaid without impacting your credit health. It will also position you strongly to avail of loans and credit products at favourable terms in the future.
For good advice on managing your credit profile while using such facilities, trusted financial services providers like Shriram Finance offer credit health check-ups and guidance customised to your needs. Make timely repayments and use credit limits moderately to leverage Postpaid without negatively impacting your credit health. It will also position you strongly to avail of loans or instant credit of up to ₹60,000 or more and credit products at favourable terms in the future.
FAQs
What are the charges for activating Paytm Postpaid?
There are no activation or annual charges for Paytm Postpaid. A convenience fee between 0-3% may be levied on the billed amount.
Does postpaid affect Credit score?
Yes, Paytm Postpaid usage and repayment history impact your overall credit score like any other credit facility. Defaults can adversely impact your score.
What are the disadvantages of Paytm postpaid?
Disadvantages include penalties for late repayments, permanent account blocking after multiple defaults, and a negative impact on your credit score - which can diminish future loan eligibility.
What are the repayment options for Paytm postpaid?
Paytm Postpaid bills can be repaid through UPI, debit cards, net banking, and other payment modes on the Paytm app.
Does activating Paytm Postpaid affect credit score?
Simply activating and using Paytm Postpaid affects your credit score since it reflects as an additional credit facility. Any defaults in repayment also impact your score adversely.
What is the Credit score for Paytm postpaid?
Paytm Postpaid does not mandate any minimum credit score for activation. However, it is recommended to have a credit score above 750 to get a higher credit limit approved.
Key Highlights
- Paytm Postpaid provides instant credit but impacts your credit score like any other loan/card.
- Defaults and delays in repaying dues can reduce your credit score.
- Apart from lower credit scores, defaults also attract late fees and can lead to account closure.
- Make repayments on time and use optimal credit limits to avoid defaults.
- Check your credit report regularly to avoid errors impacting your score.
Therefore, use Paytm Postpaid carefully, like any other loan, to avoid negative repercussions on your credit profile. Responsible usage and financial prudence can help you get the most out of this facility.
