Debt counselling: Mohan Jayaraman

Why is it important to know one's credit score? How can I know mine?
A credit score indicates the borrower's creditworthiness and lenders are increasingly relying on credit scores, as a part of the credit approval process. The higher your score, the better your creditworthiness and the more the chances of your loan application getting approved.

Different organisations take different information into account when working out your credit score and may have different scores for different products. When you apply for credit, organisations do not have to tell you exactly how they work out their credit scores but should give you a basic explanation of how scoring works and whether your application has been refused because of your credit score and whether this involves the information held on your credit. The scores lenders use typically include assessments based on factors other than the Credit Information Report or Credit Bureau Score - like employment details (full-time/part-time, role, length of employment, salary) home tenure (home owner, tenant, living with parents), age, outgoings, etc.

How can an individual retail borrower restructure his loans?

Most banks assist genuine customers and help reconcile their loans. It is best to approach your bank in the first place. There is a regulation in place for the banks to help their customers restructure. It is at the bank's discretion to identify the customers they would like to provide the facility to.

If I find it difficult to repay my loans at the present interest rate, can I ask my bank to lower the rate for ease of payment?
Loan amortisation and EMI amounts revolve on two fundamental attributes, the interest rate and the loan tenure. Typically, in the case of mortgage loans which have long tenures, banks make adjustments at specific fees to ease the EMIs by varying the tenures. Likewise, mortgage loans also have the concept of floating or fixed interest rates, where the customers get an opportunity to adjust the loan offering to their preference. These arrangements are generally not available for retail loans like personal loans, automobile loans, credit cards, etc.

I am repaying two personal loans and one credit card loan. Will I have a low credit score?
All past repayments are recorded on your credit report. If you pay your EMIs on time and as agreed while staying within the agreed credit limits and making necessary credit card monthly repayments in full and on time, your report would reflect this. If lenders see a well-managed credit history, it would positively impact your credit score. In the long term, it is advisable to have minimal unsecured debt; and prefer secured debt as it acts as an indicator of financial discipline.

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in
Today, Mohan Jayaraman, Managing Director, Experian Credit Information Company of India, and Country Manager, Experian India, answers your questions