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Credit Bureaus in India Explained

 

Understanding credit bureaus

Credit bureaus are independent third-party institutions in India which collect all kinds of financial data regarding credit cards, loans etc. about individuals and share this information with the interested people/entities. Nonbanking financial companies and banks constitute the primary customer base of these credit bureaus. The information provided by these credit agencies in India proves very useful for banks and other financial institutions to ascertain the creditworthiness of individuals and make well-informed decisions about extending credit/loan facilities to them.

It is the Reserve Bank of India (RBI) that licenses the credit bureaus in India. Furthermore, these entities are governed by the Credit Information Companies Regulation Act, 2005, and several other pertinent rules and regulations created by the RBI.

Credit bureaus in India

There are 4 main credit bureaus operational in India. The details of each one of them are as follows:

CIBIL Credit Bureau

Founded in the year 2000, Credit Information Bureau Ltd (CIBIL) was the first credit bureau to be founded in India. It boasts of more than 2600 strong members including a large number of private and public sector banking establishments, housing finance companies and nonbanking financial companies.

CIBIL gathers data related to consumer and commercial finance and creates credit reports for all individuals. The company also derives a credit score from this data, commonly referred to as CIBIL score. In fact, Reserve Bank of India has mandated all the financial institutions and banks to cross-check the CIBIL score of every person applying for a credit card or a loan, before approving their application, to prevent creation of non-performing assets (NPAs)

Equifax Credit Bureau

Equifax Credit Information Services Private Limited came into being in 2010 and reports all kinds of data such as portfolio reviews, risk scores, credit information reports etc. It is also into providing enterprise level services like fraud and credit management to businesses. The company was originally founded in the year 1899 in Atlanta, Georgaia, US and has a separate bureau in India which is dedicated to meeting the requirements of micro-finance institutions in the country. Being a consumer credit reporting agency, Equifax collects data of more than 800 million individuals and over 88 million businesses world over. It’s also counted amongst the oldest credit information companies of the world.

Experian Credit Bureau

This credit bureau came into being in 2006 as a joint venture between multiple financial institutions and banks in India, including Axis Bank, Indian Bank and Sundaram Finance Ltd. The Forbes magazine named Experian as one of the most innovative companies in the world in 2014. Experian Credit Information Company of India Private Limited prepares individual credit reports based on data gathered from banks and financial institutions, related to the financial history of people.

CRIF Highmark

An all-round credit rating company, CRIF High Mark Credit Information Services Private Limited was established in the year 2005 in Mumbai, India. It’s an RBI licensed credit bureau that not just offers credit reports to interested customers, but also caters to all borrower types including micro-finance businesses, commercial borrowers, MSMEs, retail consumers and more. It’s an RBI licensed credit bureau which actively offers credit analytics and ratings to various entities thereby contributing to India’s credit culture. On the lenders’ front, it offers analytical and information solutions to telecom service providers, insurance companies, NBFCs and banking establishments amongst other businesses.

Where do all credit bureaus get their data for calculating credit scores?

Credit bureaus are in the business of compiling public data, payment histories and credit transactions of companies and individuals. All their data is gathered from different financial institutions including nonbanking financial companies, authorized lenders, banking establishments and more. In fact, RBI has made it mandatory for all lenders to furnish such financial details to credit bureaus.

Do all credit bureaus report the same data?

All credit bureaus in India are licensed by RBI and provide reports meant for consumers and businesses. Since they obtain their information from the same banks and NBFCs which don’t differentiate between them and share all pertinent info related to the borrowers, the crux of the reported data stays the same. However, every credit bureau has its own algorithm used for calculation of credit score.