Way Forward For Credit Bureaus in India

14-Feb-2017 written by : FSI-Team

credit bureaus

Credit bureaus are still in their fledgling stage in India. The first bureau, the Centre for Information Bureau (India) Limited, more commonly known as CIBIL, commenced operations in August 2000. Since its inception it has collected credit data from over 500 member institutions for millions of Indians and Indian companies.

Today, there are four major bureaus regulated by RBI. They are CIBIL, Equifax, Experian and Crif-highmark. Each of these bureaus operates as repositories that collect and collate data on individual and commercial borrowings. Thereby they score every borrower based on their historical borrowing and repayment patterns, using their proprietary complex algorithmic formulae.

At least one of these or more bureau reports may be extracted by credit institutions to evaluate your score and peek into your credit history when assessing your loan application. With a good score your chances of being approved for a loan increases and vice-versa.

To improve credit score you must first understand the maths behind it. Timely repayments of existing debt liabilities, not taking too many loans and credit cards, maintaining low balance, using a mixed bag of loans etc. are some of the important factors that fuel your score.

One other thing that can affect your score miserably is errors and inaccuracies. Some of these errors can even point out a case of identity theft. Therefore it is in your own interest to maintain flawless reports. In order to do that effectively you must access your own credit report, regularly.

RBI Directive on Credit Reports

In the western nations, a credit report per person is given for free annually. However, inspite of credit scoring being an occidental concept the same rule was not implemented in India up until January 2017. People had to purchase their own credit reports at a price.

Ex-RBI governor, Raghuram Rajan, took cognisance of the importance of credit report monitoring in every individual's life and therefore directed every bureau to provide at least one free copy to every person once a year.

With this iconic step RBI has made it easier for people to access and self-review their reports. This will help eliminate flaws in the reporting procedure and also, people will be inclined to withdraw and study their own reports, in that way becoming more aware about the significance of this concept.

How Do Credit Bureaus Function

Bureaus sell personal copies of credit reports to consumers. However, one free credit report to be mandatorily provided translates into a million free copies, which means a loss of quite a few million rupees.

Initially, CIBIL report was sold for Rs. 550/- per copy. However, it was observed that the price acted as a deterrent and most people were not inclined to buy their reports. So they introduced a report subscription plan. Now, an individual can purchase a single copy for Rs. 550/-, two copies at Rs. 800/-, while four copies for just Rs. 1200.

With Experian & Crif-HIghmark, a single credit report will come to you at a flat rate of Rs. 399/-. Similarly, Equifax asks for a payment of Rs. 138 for just the report, while upon paying Rs. 400 you get the credit score and the report.

However, after the directive from RBI arrived, all these institutions seem to be less willing in providing even a single copy for free. They have made the process quite cumbersome and tiring. In this digital age, people are less patient and are looking for quick solutions. Slow-moving procedures act as a disincentive for people to acquire their reports.

For example, if you are looking for a free CIBIL report then firstly it is difficult to locate the link given at the bottom of their page. Thereafter, you must take a print of the form, make a copy of all documents and physically send them to their office. These will be reviewed and then a copy will be mailed to your address after one month. This is quite an exhausting process vis-à-vis if you buy a report you are given instant access to it via your e-mail.

If you were to order your free copy from Experian, you will have to enter details into an online form and then they will send you a voucher within two days, with further steps on how to order your free copy. Crif-Highmark will first verify the details entered by you in their online form and then revert to you with further steps via email after one business day.

The story is no different with Equifax. You must download their application on your smart phone. Login to it, authenticate your KYC, enter personal details and then wait for at least one working day. You will then be asked some critically confidential questions about your credit past, as part of their verification procedure, which you must answer truthfully. They will take another working day to send your password protected report to you.

By that time, most people would have given up the idea of waiting for a free copy. They would rather buy it. Doubtlessly, it completely defeats the purpose of giving out a free copy. Instead, if they made the process seamless, then people would rather return to the same bureau repeatedly for further copies. A free report could be utilised as a business strategy to attract more consumers to their website.

Without a doubt, a good credit score lays the foundation to one's strong financial future. As more and more people realise this, they will have more reason to order further copies in future. Thankfully, you can always rely on your good old We continue to work on unwrinkled and user friendly processes, to give your credit score for free. You can also enrol for our easy on pocket subscription plans and benefit from id protection services as well. May Credit be on your side?



Don't miss a bit of Credit News
Join the FSI Force