Can being a guarantor affect your CIBIL score? Here's what you should know

livemint.com:

CIBIL score, especially if the primary borrower defaults on the loan. For instance, this affects credit utilisation ratio because lenders consider the amount guaranteed as a potential loan. It, therefore, affects your ability to raise more debt.

Credit utilisation: When you become a guarantor for a loan, it could affect your credit utilisation ratio. Lenders may consider the guaranteed amount as potential debt, which could impact your ability to obtain additional credit. Impact of default: If the primary borrower fails to repay the loan and defaults, the responsibility to repay the loan may fall on the guarantor.

If the guarantor also fails to make payments, it could result in negative reporting to credit bureaus, including CIBIL. This negative reporting can lower the guarantor's credit score. Loan applications: Lenders may hesitate to extend additional credit to you if you are already a guarantor on another loan, especially if the guaranteed amount is substantial.

This can indirectly impact your credit score by limiting your ability to access credit. Higher debt burden: Being a guarantor for a loan increases your overall debt burden. While this doesn't directly impact your credit score, lenders may consider your existing liabilities when evaluating your creditworthiness for new credit applications.