Default Will Negatively Reflect On Credit Score Of Loan Guarantor

The credit score has evolved as one of the most crucial factors for credit decision making among credit grantors. Customers can now access their Cibil TransUnion Score directly from the Credit Information Company (CIC).
The credit score has evolved as one of the most crucial factors for credit decision making among credit grantors. Customers can now access their Cibil TransUnion Score directly from the Credit Information Company (CIC). In this article, I have answered some pertinent queries from consumers on the credit score.
 
I am a guarantor on the home loan of my brother. If my brother defaults on this home loan payment will it also negatively impact my credit score?
As a guarantor on any form of loan, you are equally
responsible to ensure the repayment of the loan. A guarantor pledges to repay a loan on behalf of a third party who has taken the loan. Hence, he provides a guarantee to the lender, that he will honour the obligation, in case the principal applicant is unable to do so.
 
If your brother (borrower) defaults on the loan repayment, this will definitely impact your (guarantor) credit score as well. Information on the default of these payments will also appear in the “Accounts” section of your Credit Information Report
(CIR).
 
The ownership indicator for this account will reflect as “Guarantor” on your CIR. Please keep in mind that your credit score will get negatively impacted if your brother defaults on the repayments of the loan.
 
You should therefore, as a guarantor on the loan, ensure that your brother pays his loan EMIs regularly on the due date, month-on-month.
 
If I am a first time borrower, how will my credit score be calculated?
A generic credit bureau score is a numerical expression based on statistical analysis of a person’s credit history that will represent the creditworthiness of that individual. Advanced statistical techniques are used to determine the specific levels of risk associated with a particular borrower based on his credit history. 
As a first time borrower you may not have any previous credit history and therefore do not have any data in the records of the CIC for calculating your score.
 
Borrowers who have their records at the CIC for at least six months (starting from the ‘open’ date of the account) are eligible of being scored. A new borrower without any history is not given a score.
 
What factors on my CIR are the most crucial in determining my credit score?
The credit score is calculated based on the information in your CIR. It is derived by using the details found in the “Accounts” and “Enquiries” sections on the CIR and ranges from 300 to 900 points.
 
The broad factors on the CIR that determine your credit score are centred around your credit utilisation, your month-on-month credit
repayment record and the number of enquiries on your CIR. In addition to this, the information about the trade attributes on your CIR, with reference to the age of the lines of credit, type of credit availed, mix or balance of credit instruments, etc are also vital in determining your credit score.
 
In order to ensure a good credit score, it is important to make timely loan repayments and wise utilisation of credit facilities. Financial discipline coupled with prudent credit management will ensure that you enjoy all the benefits associated with having a good credit score.
Credit Sudhaar is India’s first Credit Health management & improvement company whose goal is to help clients to Restore, Enhance and Protect their Credit and make them credit healthy
Courtesy: DNA
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