Credit Rating Improvement · Question

Should I settle small overdue payments before my next rating review?

Short answer

Yes, in most cases. Small overdue amounts to lenders, statutory bodies or suppliers are visible signals of discipline, and a pattern of delay can weigh on how analysts judge your willingness to pay. Clear them if your cash flow allows, keep proof of payment, and avoid draining working capital just to tidy the picture.

In more detail

Analysts form a view of your conduct from many small facts. A string of minor delays on loan instalments, interest servicing, tax dues or supplier payments suggests tight liquidity or loose controls, even if each amount is small. Clearing them removes a negative signal and costs relatively little.

Prioritise in this order:

Dues to lenders, because loan conduct is the most visible and is also reflected in reports shared with credit bureaus.
Statutory dues, since delays here also raise doubts about compliance.
Long-outstanding supplier payments, which the agency may notice in ageing schedules and in what trade creditors tell it.

Settling a few overdue items shortly before a review is fine when those items were genuinely due. The trouble starts when you pay arrears by stretching another creditor or pulling cash needed for operations. That only moves the problem and can reappear as a bigger one next quarter.

Avoid a one-time scramble

If delays recur every few months, the cause is usually cash planning, not carelessness. Fix the schedule, such as aligning due dates with when customers pay, so the arrears do not return after the review.

Keep a simple record: a dated list of what was overdue, what was cleared and the proof. If an analyst asks about a delay, a clear explanation with evidence reads far better than silence. Also note that a lender's classification of delayed instalments, such as SMA-0, is separate from the agency's view, though both reflect conduct.

Key points

Small arrears are cheap to clear and remove a visible negative signal on conduct.
Clear lender dues first, then statutory dues, then long-pending supplier balances.
Do not rob working capital or stretch other creditors merely to look tidy.
Fix the cash timing that caused delays so they do not recur after the review.
Keep dated proof of payment and a brief explanation ready for the analyst.

Who this applies to

Owners with a review coming up and a few minor unpaid items.
Finance teams seeing repeated short delays in instalments or tax payments.
Promoters unsure whether paying arrears early will matter to the analyst.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.