Debt Counselling: Mohan Jayaraman

Today, Mohan Jayaraman, managing director, Experian Credit Information Company of India & country manager of Experian India, answers your questions

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 equated monthly instalments (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.

Recently, RBI said it would label guarantors of many corporate borrowers as wilful defaulters, as the borrowers were not clearing their dues. Does this mean that if a borrower doesn't repay a loan, the credit record of his guarantor is impacted and he will find it difficult to get loans? What can guarantors do in such situations?

You are legally responsible for another person's debt if it is in your and their name or you have agreed to be a guarantor. Any default on the loan will have a bearing on your credit report and score as well. Specific rules regarding if and how you can dissociate yourself as the guarantor of a loan varies from bank to bank. Typically, your dissociation as a guarantor of the loan will need the consent of the borrower and the bank concerned; since the bank had approved the loan considering the availability of your guarantee. Also, in case you dissociate yourself as a guarantor, the borrower may have to provide a new guarantor with acceptable credentials for the concerned loan.

Does one's credit history get impacted by non-payment of pending phone bills? What are the other factors impacting this?

Data repositories with the bureaus only pertain to credit data submitted by financial institutions. However, globally, the credit bureau system has evolved to include other data sources like insurance, telecom, utility bill payments, etc. Thus, though pending phone bills do not impact credit history, it is a good idea to maintain financial discipline with these obligations as well. All debt, with past repayments, is 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 monthly repayments in full and on time, your report would reflect this. Likewise, your credit history is adversely impacted by any delays or defaults on repayments.

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in