How to manage your Credit Report, when you loose your co-applicant or guarantor?

You must be wondering how the credit history of a family member or friend can affect your or anyone's credit score post his demise. Well, it won't if the person was a sole borrower. However, if someone in the family was a co-applicant or a guarantor, which is quite common.

The obligation to repay the credit falls on him and thus affecting the score. Such a situation has to be handled carefully to ensure it doesn't leave a life-long blotch in the credit history. 

Getting your name off the defaulters list.

A guarantor or co-applicant is legally responsible towards the timely repayment of the loan in case of untimely demise of the principal borrower. It is important to understand that by agreeing to be a guarantor on the loan, you are also.

Each bank will have their own policies to deal with the situation of the death of the primary borrower. "Only the lender has the right to relieve you of such a commitment and they are likely to do so when convinced of the repayment of the underlying loan even without such a guarantor," says Mohan Jayaraman, MD, Experian Credit Information Company of India and Country Manager, Experian India. 

Even after the outstanding loan is settled, get a copy of your credit report and ensure your name is clear. This is because there are chances that a wrong an entry is still negatively affecting your score. The information on the loan that has been guaranteed appears in the 'accounts' section on the guarantor's report. If the ownership status of this loan account will be reflected as 'guarantor', contact the bank immediately and update them about the discrepancy. 

"Although, every credit bureau has a dispute resolution arrangement that can be followed in cases of incorrect entries, any change to credit report can be done only post feedback and concurrence from the bank," says Jayaraman. For instance, CIBIL has an online dispute resolution mechanism for resolving the discrepancies raised by the consumer. "On accessing your CIBIL report if you find any un-updated or incorrect information, you may raise a 'dispute request'. CIBIL will analyze and forward you. 

What's more? An identity theft...

Then there is a perpetual threat of identity theft. "Identity fraudsters sometimes impersonate deceased people, using their personal information from death notices and other sources to exploit delays between death and the closure of person's accounts," says Jayaraman of Experian India. 

The individual who has stolen your identity will in all probability not pay back the misappropriated funds. Hence, the lender will update your credit report to as a defaulter. Unfortunately, in the event that your identity is stolen, you will be unaware that this has occurred. "Most only discover this when they request a report update or when they apply for a loan and the application gets rejected," says Chandorkar of CIBIL.

Preventive steps: So, you should always ask for a consolidation report to monitor any irregularity. Family members should immediately report about any loan application inquiries or credit card requests made recently against the deceased name. Even if you are unsure, there is no harm in double checking. 

Another basic step to prevent an identity theft is to keep the banker, insurer, stock broker and credit card company about the death of the family member. "Do not forget to update the major registries such as PAN registry, UIDAI, etc. Also ensure that you do not include too much identity-specific information in the obituary. The fraudsters may misuse this information--set up new accounts, etc., that might hamper your financial life," says Jayaraman. 

Corrective measures: In case such a theft happens and your finances get affected, remember that this isn't just a cyber but a financial crime as well. "You will have to inform the relevant law enforcing authorities like police, government departments etc. Inform the associated financial institutions of this situation with all the facts and supporting documentation and seek grievance," adds Jayaraman.

For more learning visit www.cibilconsultants.com

Source: Secondary