Interested in knowing your credit score before taking a loan? You would need the services of a credit bureau for that. Here’s what you need to know.
In India, credit bureaus play a crucial role in the financial ecosystem. They facilitate efficient lending and risk-assessment practices. The credit bureaus in India operate under the RBI’s guidelines and regulations. Currently, four credit bureaus operate in India: TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. These bureaus compile credit scores and reports based on an individual’s credit history, payment behaviour, and borrowing patterns. These reports aid financial institutions in evaluating creditworthiness and making informed lending decisions.
What Is a Credit Bureau?
A credit bureau collects and maintains a wide range of credit-related information on individuals and businesses. It gathers data such as credit card usage, loans taken, overdraft facilities, etc., from various financial institutions and generates credit reports and scores, which reflect an individual or business’ creditworthiness and repayment history. Additionally, information such as income tax records, timely payment of utility bills, and other financial behaviours may also be included.
These bureaus gather this information from lending companies, data-collection agencies, and other sources. The purpose of this data collection and analysis is to create a comprehensive profile of an individual’s or business’ creditworthiness, including their repayment behaviour, default history, and debt-to-income ratio.
What Is a Credit Score?
A credit score is a number that indicates a consumer’s creditworthiness to lenders, such as banks and NBFCs. It reflects how well one has managed credit in the past, including personal loans, home loans, and credit cards. In simple terms, it tells lenders the level of risk involved in lending to an individual and their likelihood of repaying the loan on time.
The credit score companies in India compile credit scores ranging from 300 to 900. A score above 750 is generally considered good by lenders. The higher the score, the better the chances of getting approved for new credit. Different credit-scoring models and score ranges exist, but they typically fall into the following categories:
- 851-900 (Excellent): – Indicates a borrower with no payment defaults, considered low-risk.
- 751-850 (Good): Favourable score showing strong credit history with timely payments.
- 651-750 (Average): – Represents a balanced credit history with fair credit management.
- 501-650 (Poor): – Indicates a higher risk level, potentially due to missed payments or high credit utilisation.
- 300-500 (Very poor): Reflects a bad credit history with defaults and difficulties in obtaining credit.
Borrowers with lower scores may face challenges in accessing credit or may be offered higher interest rates. It’s advisable to improve a low credit score to enhance creditworthiness.
List of Credit Bureaus in India
The top credit bureaus in India include TransUnion CIBIL, CRIF High Mark, Experian and Equifax. These credit bureaus play a vital role in the Indian financial ecosystem by facilitating efficient lending decisions, promoting transparency, and fostering a healthy credit environment.
1. TransUnion CIBIL
TransUnion CIBIL is one of the leading credit bureaus in India. It maintains a comprehensive database of credit information, including credit histories, repayment behaviour and credit scores. Its credit reports and scores help lenders assess creditworthiness and make informed lending decisions. TransUnion CIBIL also offers services like CIBIL Rank, which provides a rank based on creditworthiness, and CIBIL Market Insights, which offers analytical insights on credit trends.
2. Experian
Experian is another prominent credit bureau operating in India. It collects credit-related data from various sources and generates credit reports and scores. Experian’s credit reports provide a detailed overview of an individual’s credit history, while the credit score represents their creditworthiness. It also offers fraud-detection services, identity verification solutions, and analytics to assist businesses in managing credit risk.
3. Equifax
Equifax is a global credit information company that operates in India as well. It gathers credit data from different sources and compiles credit reports and scores for individuals and businesses. Equifax provides credit-information solutions to lenders, helping them make informed lending decisions. It also offers risk-management solutions and fraud-prevention services to assist businesses in mitigating credit risks.
4. CRIF High Mark
CRIF High Mark is a leading credit bureau in India that provides comprehensive credit information and risk management solutions. It collects and analyses credit data to generate credit scores and reports. CRIF High Mark’s credit reports provide detailed insights into an individual’s credit history, while the credit score represents their creditworthiness. It also offers services like portfolio monitoring, fraud prevention, and credit-risk management tools.
Credit Bureau Regulation
Credit bureaus also known as Credit Information Companies (CIC) are regulated by Reserve Bank of India (RBI) under Credit Information Companies (Regulation) Act, 2005 (CICRA 2005).
As per the CICRA 2005 Act, only the following groups can be members of Credit Information Company (CIC):
- Credit Institutions as per Section 2 (f) of the CIC Act.
- Credit Information Companies as per Section 2 (e) of the CIC Act.
- Specified Users as per Section 2 (l) of the Act and Regulation 3 of the Regulations in “CIC Act” and “CIC Rules,” respectively.
How do Credit Bureaus Work?
The primary purpose of the credit bureaus is to collect information from different financial institutions and, based on this information, prepare a credit report. Here’s how it works:
Collect Credit Information: Credit bureaus gather your credit information from various sources such as lenders, banks, collection agencies, public records, etc. It includes information about your credit accounts, repayment history, outstanding debt, etc.
Maintains Credit Information: They store your credit information in their database, and if there is any change or new information in your account, they regularly update it in the database.
Provide Credit Reports: On the basis of your credit information, it generates a report, which is known as a Credit Report. This report is a comprehensive summary of your credit history, divided into multiple sections such as personal information, repayment history, credit utilisation, credit enquiries, credit mix, and other information.
Provide Credit Scores: On the basis of the information from your credit report, it gives your three-digit credit score. This credit score is used by potential lenders to evaluate your creditworthiness.
Credit Reporting to Lenders: They provide credit reports to lenders or creditors so that they can evaluate applications for credit such as loans, credit cards, mortgages, etc.
Dispute Resolution: They are responsible for maintaining accurate information in the credit report. If there is any error in the credit report, consumers can report the error to the credit bureaus, and they are obligated to check the information and make corrections in the report.
Functions of Credit Bureaus
- Gather, analyze and process the financial information of the individuals.
- Provide credit information to the lenders or financial institutions.
- Provide credit scores of the individuals
- Conduct research projects
- Engage in any other business directed by the RBI.
As per this Act, every credit information company must provide one free full credit report (FFCR), including credit score, once a year. The report will be given in electronic format upon an individual’s request if the credit history is available with CIC.
How do Credit Bureaus Work?
The primary purpose of the credit bureaus is to collect information from different financial institutions and, based on this information, prepare a credit report. Here’s how it works:
Collect Credit Information: Credit bureaus gather your credit information from various sources such as lenders, banks, collection agencies, public records, etc. It includes information about your credit accounts, repayment history, outstanding debt, etc.
Maintains Credit Information: They store your credit information in their database, and if there is any change or new information in your account, they regularly update it in the database.
Provide Credit Reports: On the basis of your credit information, it generates a report, which is known as a Credit Report. This report is a comprehensive summary of your credit history, divided into multiple sections such as personal information, repayment history, credit utilisation, credit enquiries, credit mix, and other information.
Provide Credit Scores: On the basis of the information from your credit report, it gives your three-digit credit score. This credit score is used by potential lenders to evaluate your creditworthiness.
Credit Reporting to Lenders: They provide credit reports to lenders or creditors so that they can evaluate applications for credit such as loans, credit cards, mortgages, etc.
Dispute Resolution: They are responsible for maintaining accurate information in the credit report. If there is any error in the credit report, consumers can report the error to the credit bureaus, and they are obligated to check the information and make corrections in the report.
What are the Differences Between the Credit Bureaus?
In India, we have multiple credit information companies that collect and maintain credit-related information of individuals. Here’s a comparison between different credit bureaus in India:
| CIBIL Transunion | CRIF | Experian | Equifax | |
| Establishment Year | Established in Year 2000 | Received license from RBI in the year 2010 | Received license from RBI in the year 2010 | Received license from RBI in the year 2010 |
| Credit Score Range | 300-900 | 300-900 | 300-900 | 300-900 |
| Cost of the Report | Full credit report with credit score Rs 550 | Credit report without a score at Rs 99. Also, a subscription plan is available for 1 year, 6 months, monthly, and one time. | Free Credit Report with Score at ET- Money. | Rs 138 for the credit report without a credit score. Rs 400 with a credit score. |
Credit Rating Agencies vs. Credit Bureaus
Many of us think that credit rating agencies and credit bureaus are the same. However, this is not the case, as different entities serve different purposes. Let’s understand how they are different.
Credit rating agencies are responsible for evaluating the creditworthiness of business entities such as sole proprietorships, public and private companies, etc. They are regulated by the SEBI (Securities and Exchange Board of India).
They use financial documents and other financial details, such as sales, debts, profit, etc., to give credit ratings to the entities. These credit ratings are used by the lenders to determine the risk involved in lending to the business entity. Currently, there are 7 credit rating agencies, which are:
- ACUITE RATINGS & RESEARCH LIMITED
- BRICKWORK RATINGS INDIA PRIVATE LIMITED
- CARE RATINGS LIMITED
- CRISIL RATINGS LIMITED
- ICRA LIMITED
- INDIA RATINGS AND RESEARCH PVT. LTD. (FORMERLY FITCH RATINGS INDIA PVT. LTD.)
- INFOMERICS VALUATION AND RATING PVT. LTD.
Credit bureaus are responsible for evaluating the creditworthiness of the individual. It uses various information, such as your past repayment history, credit utilization, outstanding debts, etc., to prepare your credit report and issues a credit score based on these pieces of information. Currently, there are 4 credit bureaus in India:
- TransUnion CIBIL
- Experian
- Equifax
- CRIF High Mark.
How to Dispute Credit Report Errors with Bureaus?
Credit bureaus are not only responsible for preparing a credit report and giving credit scores but also for providing customer support related to errors in the credit report. So, if you have identified any errors in the credit reports, you can fix them by contacting your credit bureaus. Here is how you can dispute your credit report:
Step 1:Obtain Your Credit Reports: The first step is to get your updated credit report from the credit bureaus. You can get a credit report from any of the credit bureaus at zero cost for one time only.
Step 2: Review your credit report: Now, you must check your credit report and find if there are any accuracies in the credit report related to incorrect account details, incorrect outstanding balances, account-related errors, etc.
Step 3: Fill out the online dispute form: You must fill out an online dispute form on the credit bureau’s website. Here, you must provide the details of the errors you identified in the credit report.
Step 4: Submit dispute form: Finally, you must review your details to be updated and submit your dispute form online.
After submitting your form, credit bureaus will check your details and verify it with the lenders, and if an error is found, they will update you accordingly. This process might take 30-45 days.
Conclusion
Credit bureaus play an important role in the financial ecosystem. They collect and store the financial data of individuals, which are used by financial institutions to measure the creditworthiness of potential borrowers. The comprehensive reports prepared by the credit bureaus help the lenders to make informed lending decisions so that there is a very low possibility of default in future.
FAQs for Credit Bureaus
Which credit bureau provides the most accurate credit report?
Credit reports issued by any credit bureaus are equally valid and accurate. However, most banks or lenders in India prefer credit reports issued by CIBIL Transunion.
How are credit reports used by the lenders?
Lenders use credit reports to evaluate your creditworthiness and decide whether you are eligible for credit. Credit reports give information about your past credit history, repayment history, current outstanding debts, etc., and based on this information, they make the decision to extend credit.
Why are credit bureaus required to issue free credit reports?
As per the RBI (Reserve Bank of India) guidelines, every Credit Information Company (CIC) in India must provide a free full credit report once in a calendar year. The report will be issued only at the request of the individual with a credit history.
Is there only three credit reporting bureaus?
In India, credit reporting agencies authorised by RBI can only operate as credit information companies. Currently, there are 4 credit bureaus which are authorised by RBI. : Transunion CIBIL, CRIF, Equifax and Experian.
How many Credit Rating Agencies in India?
Here is a list of all credit rating agencies in India:
Credit Rating Information Services of India Ltd. (CRISIL)
Investment Information and Credit Rating Agency of India (ICRA) Ltd.
Credit Analysis and Research (CARE) Ltd.
Acuite Ratings & Research Ltd.
Brickwork Ratings India Private Ltd.
India Ratings and Research Pvt. Ltd.
INFOMERICS Valuation and Rating Private Ltd.
