A Credit Rating Agency in India can be set up after SEBI grants the approval for such business....
When it comes to lending it is a risky matter. One must be assured of the creditworthiness of a borrower before effecting lending. Earlier the banks and other financial institutions had little information regarding a borrower’s repayment status therefore banks remained susceptible while lending money to people. Today they have enough information about the repayment history of a borrower because of the Credit bureau or Credit Information Companies.
A Credit rating bureau stores information regarding credit usage by an individual. The companies gather information related to the credit history of an individual from the lenders and other financial institutions to make credit reports and credit scores. This information stored by the credit rating bureaus helps the lenders in assessing a borrower’s financial history and helps the lenders in deciding whether a loan can be granted to the borrower.
There are 4 major credit rating bureaus in India. These are:
The credit bureaus in India take into account the following factors before assigning a credit score–
These factors are complied together to form a credit score of a borrower. The lenders depend on these scores to decide if they should lend or not. The factors are also helpful for the borrowers as well as they come to know about their credit situation and what further steps need to be taken for becoming loan worthy.
Also, Read: Credit Rating Bureaus in India: CRIF and Experian.
Trans-union Credit information bureau also called CIBIL is the first and most prominent credit rating bureaus in India. It started its operations in the year 2000 and is licensed by the Reserve Bank of India. It provides retail or individual credit scoring and apart from it also provides credit scoring to Commercial Institutions and Microfinance Institutions. CIBIL is so popular among people that they call credit report as CIBIL report. It has a huge volume of banks and NBFC’s as its members compared to other credit bureaus.
CIBIL offers credit report at a cost of INR 500 and such payment can be made through any electronic mode such as debit, credit card or net banking. The credit report of CIBIL can be taken at any time when needed. In addition to the services provided by CIBIL it also provides CIBIL bureau analyzer, portfolio reports etc for organizations.
Equifax got its license in the year 2010 and since has been providing credit reports to various individuals and commercial institutions. It is the oldest credit rating bureau in the world. In its reports Equifax rates an individual between 1 to 999 where 1 is the lowest and 999 the highest.
Equifax offers credit report at the cost of INR 138 and if an individual seeks both credit report and credit score then it will cost INR 400. It accepts payment in Demand Draft (DD) mode only. The credit report of Equifax may be taken 4 times in a year to check the financial health of a person. On payment of INR 1000 annual subscription of the Equifax credit report can be gained. The Equifax provides a pictorial representation in the credit report that makes it easier to understand.
III. CRIF High Mark
CRIF is one of the credit rating bureaus in India that provide seamless credit report services to the borrowers. Here borrowers mean commercial borrowers, MSMEs (Micro, Small and Medium Enterprises), Micro-finance, etc. It was established in the year 2007 and was licensed in 2010. CRIF pioneered the establishment of the Microfinance bureau database in India and it is now the world’s largest Microfinance bureau database.
CRIF high mark offers credit report at the cost of INR 399 and one can check online the CRIF credit score without paying any additional fee. It provides commercial score, identification, and anti-fraud services to companies.
Experian began its operations in India in the year 2010 and offers credit rating between 300 to 900 where 300 is the lowest and 900 the highest. Just like other credit rating bureaus, this credit bureau also provides services in analytics and other decision-making services for business apart from providing credit scores to individuals.
Experian offers credit report and score at a cost of INR 399 and if you require a physical copy of the Experian credit score then INR 138 needs to be paid and credit score can be accessed.
India has seen numerous high profile corporate loan default cases in the recent past but as far as credit retail is concerned the picture has been much better. This is attributable to the presence of credit rating bureaus in India. It has empowered the banks or other lenders to make informed decisions regarding loans which have reduced the number of defaults. It has also benefitted the borrowers where they can analyze their financial standing through credit scores.
Each of the credit rating bureaus is best in its way and it may be difficult to come to a conclusion which is the best among all. However, it may be noted that most of the individuals and financial institutions believe that the CIBIL credit bureau is the prominent one out of all. Nevertheless a food for thought (for borrowers) would be you must only borrow that which you can repay.
Read, Also: Credit rating bureaus in India: CIBIL and Equifax.