Delay in phone bill payments may hurt credit scores

The next time you delay or don't pay your phone bill, you may have to deal with more than just a call from your service provider reminding you about the dues. It may affect your credit score and mar chances of getting loans from banks.

According to Harshala Chandorkar, senior vice president-consumer relations, Credit Information Bureau of India or Cibil, the company is in discussions with leading telecommunication players like Vodafone and Bharti Airtel for using their respective databases and amalgamating these in the credit score.

Some telecommunication service companies already access credit scores of an individual to get a general overview of his/her credit history and determining credit limit. However, they do not contribute to the credit bureaus' record. Presently, a credit score is based only on home, personal and car loans and credit cards.

However, though the discussions are still in preliminary stages, you should start familiarising yourself with concepts like credit limits for mobile bills and how these can impact. A credit limit is similar to a spending limit on credit cards.

Says Anurag Prashar, president, corporate services, Reliance Communica-tions, “Cibil has approached Reliance Communication with a proposal to use their database to enable us profile our postpaid customers. Their credit profiling framework is intended to help telecommunication players identify defaulters. It will also assist in assigning adequate credit limits.”

According to a Bharti Airtel spokesperson, credit limit is a function of a customer's usage and past history. Numbers are assigned based on how long you've been with a service provider, security deposit, usage and payment history, services opted for. A steady high usage and regular payment means high credit limit. This limit is reviewed every month.

Although credit limit is also supposed to check your costs, it may often exceed your average monthly usage. You are notified only when you reach a certain percentage, sometimes on using 90 per cent of the limit. When you exceed your limit, there's a temporary restriction on outgoing calls and messages. To restart the services, you are required to make an interim payment. Say your credit limit is Rs 2,000 and by the twentieth of the month your bill reads Rs 2,500. You will have to pay a specific amount to bring the dues within the credit limit. The balance will be payable in the next bill.

Bharti Airtel is exploring a partnership with Cibil to leverage their databases. Industry players suggest the phone payment history when shared with credit bureaus will aid in setting credit limits. Much like the credit card issuers.

This may make it difficult for consumers to move to new service providers without clearing off dues. “There is no central database for service providers currently. If telecommunication companies share their data with Cibil, this may change,” feels Sanjay Agarwal, senior vice-president and group head, retail strategy and branding at Arcil.

In Western countries, users with no prior credit history rarely get a postpaid connection. They must use a prepaid connection first and after sufficiently building the credit history, apply for a postpaid one. Even then, if there are any defaults in payments, customers find it difficult to change service providers for postpaid connections. A practice that may be applied in India as well.