25-Jan-2016 written by : FSI-Team
With all banks and financial institutions in India now relying heavily upon credit reports before making the lending decision, it becomes very crucial for individuals to not only track their credit reports but also over time work towards enhancing the same.
A fair estimate of your creditworthiness, a credit report is a document generated by credit bureaus based on your financial information that is submitted to the bureau by its member institutions, i.e. lenders. Going through this information tells a lender whether lending to a particular customer would be risky, and what the chances are therefore of the loan going ‘bad’, or the customer defaulting on payment.
In India, there are four credit bureaus licensed to operate by the Reserve Bank of India, namely CIBIL, Equifax, Experian and CRIF High Mark. Of these, CIBIL is the oldest bureau and hence colloquially a credit report is often called a CIBIL report. In actuality, the information contained within these reports is more or less on par across bureaus, as the parameters on which this data is based is the same.
Simply put, a credit score is a three-digit numerical summary of the data contained within the credit report. Hence while it does not differ from the report, it is an essential part of the document. Ranging between 300 and 900, a higher score always betters your chances of your loan or credit card application being considered favourably by a lender.
Essentially, there is no such thing as a free CIBIL report at present. None of the four bureaus today offer reports for free, they are made available to borrowers at a nominal cost. You can request for a copy of your credit report by following a quick and hassle-free online process with CIBIL. Upon submitting the relevant information and minimal documentation, the report will be made available via email in a very short period of time, thus making the process very convenient as well as safe.
Similarly, if you wish to avail of a free credit score, you can log on to www.freescoreindia.com, for example, wherein a free CIBIL score is made available in conjunction with Credit Sudhaar, India’s premier credit health management company. Credit Sudhaar now also offers you your Equifax score for free, by logging on to their website, www.creditsudhaar.com.
In several countries across the globe, credit reports are available for free. In the United States of America for example, under federal law, namely the Fair and Accurate Credit Transactions Act (FACT), consumers are encouraged to request for one free comprehensive disclosure of all the information in their credit report every twelve months through a Central Source, to ensure that their credit history is accurate and up-to-date. This free report however does not consist of the credit score, which can be purchased additionally when getting the credit report.
In India, credit reports are now slowly catching on, and the recent revised guidelines on usage will only strengthen the requirement further. Hence, with the option of getting a free cibil report, you get a glimpse into your credit history, no doubt, but it is always prudent to be aware of the complete information which can only be gleaned from a complete report.
Consider this: your credit report shows an open account that you have not availed of, say a home loan. It could reflect either on account of incorrect data being reported to the bureau, or in a more serious case, you could be the unknowing victim of identity theft. In this scenario, your personal information is used to avail of a line of credit, and this reflects on your account. Naturally, any such instance must be brought to the notice of the concerned bureau and financial institution immediately to take necessary action.
Hence, while other countries may be offering free credit reports, given the relatively nascent stage of the life cycle that the credit bureaus in India are currently at, as of now, reports should be made available at a cost, even if nominal. It is in the interest of consumers’ financial health that they should obtain their reports at regular intervals to stay credit healthy.