subject: Banking on credit bureaus [print this page] Applied for a loan that got rejected because of a poor "credit score", as your bank put it? Before you take out your anger on the agency that gave you this poor score, it would pay for you to know that the agency is in no way responsible for the rejection. Confused?
Then read on to find out what credit bureaus are all about, what you need to do to maintain a healthy credit score and the procedure to access your score from the agency and also make corrections to it, if any.
In India, the concept of a credit bureau has been around for only 10 years with CIBIL (Credit Information Bureau (India) Ltd) being the first to start operations. In recent times, reputed agencies in the US and Europe such as Experian and Equifax that have been in existence for several decades have also commenced operations in India.
Credit bureau functions
A fast growing economy and higher disposable incomes means that people are consuming more and are willing to leverage their cash flows and avail themselves of various loans and credit cards.
This means that banks need a suitable decision making process to assess the risk associated in granting a loan for which they take the customers' credit report as one of the key inputs.
Broadly, a credit information bureau is a repository of financial details pertaining to borrowers.
A clutch of banks and financial institutions and broadly most credit grantors are members of the credit bureau and provide information pertaining to the loan(s) that a customer may have taken, his/her repayment history, delays or defaults and so on.
For example, CIBIL has most of the leading banks and financial institutions in the country such as SBI, HDFC, ICICI Bank and Punjab National Bank, among others, as its members and shareholders.
Experian together with seven participating banks and financial institutions have also recently commenced operations in India.
So all the data that is provided by these members pertaining to customers' loans home, personal loan, auto and the like (including credit cards) - is formatted into a systematic fashion in the form of credit information report.
It is important to know what a credit information report contains and what it doesn't.
Basic details including name and address, date of birth, Pan Number, passport number and so on are present.
The financial information pertains to all loans and credit facilities availed by a borrower from various institutions, past payment history, amount overdue and number of inquiries made on that borrower by members. The credit information report does not contain income or details pertaining to the investments, savings and assets owned by the borrower.
Access to information is highly restricted and is given only to authorised persons to ensure confidentiality. The members keep sending customer information periodically so that the credit bureau can be up-to-date on all details.
Scoring credits
In order that banks and financial institutions may be able to assess the risk associated with respect to regular EMI repayment loans taken as well as credit card dues, the credit information report gives a strong basis for arriving at a decision.
Credit bureaus also give a score called the credit score based on a customer's past track record of repayments.
