Consider the following three situations:
- Vikas has a three credit cards and he is late in paying the bill by a few days on almost all three of them since the last few months.
- Priya is getting married next month and is planning to change her name and adopt her husband’s surname post marriage.
- Ayesha has a home loan which she plans to prepay in the coming few months using the performance bonus she is expecting.
Which of the above three situations is likely to impact your credit score and in what way?
- Delayed payments by Vikas are harmful for his credit score, the more frequently he does it the worse it is. He will have to remedy his ways and will have to figure out bad credit fix soon to rectify this situation.
- Priya changing her name or surname or both post marriage or otherwise will have no impact on her credit score whatsoever.
- Ayesha pre-paying her loan will give a temporary jolt to her credit score but it not something that will have a lasting negative impact on the credit rating.
Name Change and Its Impact on the Credit Score:
As we said above changing the name or the spelling, adopting a new name, adding a surname etc have no impact whatsoever on the CIBIL score. The credit rating calculation is based on five parameters which are as follow: repayment history, credit mix, utilization ratio, credit inquiries and age of credit. Personal details like name, age, sex or contact details etc are not taken into account when calculating this score. Another aspect that needs to be kept in mind is that the income levels of an individual also have no impact on the calculation of the score; however lenders may want to have a look at the debt to income ratio or length of service etc before deciding whether they will lend to an individual or not.
When one changes their name all the details about various loans, credit cards and their repayment etc are carried forward in the new name. Past history whether good or bad is not erased so the score remains whatever it is without any impact on it due to name change.
Since CIBIL gets all data from lenders you need to inform the lenders as well as the rating agency about the name change so that the necessary changes can be made in the records. You will have to update the records with all the lenders from where you have running loans and also with credit card companies. They will make the necessary changes and the records are carried forward in the changed name.
You need not close or surrender your cards due to a name change; you can just inform the credit card company and get a new card issued with the changed name spelling without the need to close or surrender a card. This will ensure that older accounts remain in your credit trail which is good for the overall credit rating. Women when getting married and changing their name/surname or adding their spouses name need to be especially careful. They should make sure that they get the necessary changes made so that their credit history is carried forward. Failing to do so, they may find it difficult to get a loan or credit card sanctioned in future in absence of any credit trail. It is also important to keep old accounts active and running to have a deep credit trail which gives a better picture of one’s credit behavior.
Though change in name does not directly impact the credit score it may cause delay or hassles if one is looking at applying for a card or a loan in the ensuing period. Change in the records of CIBIL does not happen immediately so they find themselves in a tricky situation when applying for new credit. This can be avoided to an extent by writing to CIBIL directly rather than waiting for the lenders to do so. Also ensure that you have sufficient time lag between the name change process and apllying for any fresh credit.