Credit bureaus in India: What is Their Role and How Do They Work?

You may be aware of the importance of your credit score when you apply for a loan or a credit card. This score reveals how creditworthy you are, based on which lenders approve your application for credit. Since your score is based on your individual credit information report (CIR), you may wonder who collates this report and assigns the score.

Your credit score is assigned by credit bureaus in India, namely TransUnion CIBIL, CRIF High Mark, Equifax and Experian. These independent third-party companies work under the purview of the Reserve Bank of India and are licenced to gather, interpret and safely store credit-related data as per the regulations listed in the Credit Information Companies (Regulation) Act, 2005.

Read on to know more about these credit bureaus and how they create CIRs and assign your credit score.

Overview Of Credit Bureaus In India

TransUnion CIBIL

• With credit information records of 1000 million+ individuals and enterprises, TransUnion CIBIL has one of the biggest collections of customer information in the country.
• It was incorporated in the year 2000 and launched its services as a credit bureau in India in 2004.
• TransUnion CIBIL has over 5,000 members, such as leading financial organisations, banks, housing finance companies and NBFCs.
• It offers you convenient services to check your credit score and understand its components in depth with a range of information on its website and app, called CIBIL® Score & Report.
• It is known for trustworthy and wide-ranging information related to both retail customers, corporates and other entities with the sole purpose of managing lending risk better.
• It introduced the CIBIL score in 2007 and was the first to launch a database of high-risk credit activity and mortgage loans in India in 2010.

CRIF High Mark

• Among the leading bureaus in India, CRIF High Mark supports millions of lending decisions each month.
• Founded in 2008 and launching operations in 2011, it offers a range of services including credit information, credit management, analytics and scoring, providing data to banks, insurance and telecom companies, NBFCs and more.
• Its investors include Edelweiss, State Bank of India, Shriram City Union Finance, Punjab National Bank and more.
• It was the first credit bureau in India to offer full-service information on various types of borrowers, be it MSMEs, retail consumers, microfinance borrowers, commercial borrowers and more.
• CRIF High Mark collects information from over 4,000 financial institutions and has one of the biggest databases in the country.
• It was the first in India to offer a comprehensive Credit Information Report, provide microfinance credit reports and offer a commercial score to businesses.

Equifax India

• With world-wide operations spanning 100+ years, Equifax began providing credit information and other services in India in 2010.
• Equifax Inc., USA, entered into a joint venture with Bank of Baroda, Kotak Mahindra Prime Limited, State Bank of India, Bank of India, Union Bank of India, Sundaram Finance Limited and Religare Finvest Limited to launch Equifax Credit Information Services Private Limited (ECIS).
• Equifax ECIS caters to the needs of 1000+ members, which include insurance companies, NBFCs, banks and microfinance institutions.
• It is known for its thought leadership in microfinance, fintech lending, retail lending and MSME financing, publishing annual reports that offer myriad insights.
• Both borrowers and lenders can access data through Equifax India’s Basic Consumer Information Reports, Enhanced Consumer Information Reports, Equifax Alerts and Microfinance Institution Credit Information Reports.
• Equifax India is known for its advanced analytics, industry expertise and trusted data.

Experian

• Offering data and analytics services across the globe, Experian has been in existence for over 125 years, promoting better credit management and financial inclusion.
• It launched its services as a credit bureau in 2010 in India and works with over 5,000 members with a database of more than 430 million records.
• Apart from providing credit scoring services to lenders, it also helps individuals get access to information related to boosting and maintaining credit scores, helps businesses grow and prevents fraud and identity theft.
• Known for its sophisticated technology and data interpretation, Experian works with financial companies, insurers, e-commerce firms and telcos, offering a wide range of information services.
• Among a bevy of awards, Experian India received the ‘Technical Innovation Award’ at Technoviti 2020 and was named one of the ‘World's Most Innovative Companies’ multiple times by Forbes.
• Apart from consumer credit reports, Experian India also offers commercial reports and a range of market insights.

How Credit Bureaus in India Work

Credit bureaus, also called credit information companies or agencies, collect information related to your credit transactions from banks, financial companies and other institutions. These member institutions report all relevant data including the loans you have applied for, existing debts, repayment behaviour, new applications for credit, credit card bill payment behaviour and more. In some cases, information related to your mobile and utility bills as well as other public data is also collected.

Based on this information, credit bureaus in India create your credit information report and using the data from the report, they assign you a credit score. If you have paid EMIs and credit card bills on time, have the right credit utilisation ratio, have taken on a mix of credit solutions, and do not apply for too much credit simultaneously, they assign a higher credit score. If you have defaulted on loans, delayed repayment, or have a large amount of debt as compared to your income, your credit score will be low.

When you apply for a higher credit card limit or a new loan, lenders check your credit score and report by asking these credit agencies for it. A high credit score helps you get affordable financing of the amount you desire from top lenders. A low score, on the other hand, can lead to your loan application getting rejected or you getting a lower amount of credit at a higher interest rate.

Role of credit bureaus in India

This cycle of information and data helps lenders manage the risk of lending to both individuals and businesses by exercising due diligence. In this way, credit information companies play a critical role in assessing a borrower’s repayment capacity and reliability. This helps lenders reduce their risk and approve loan applications quickly.

Credit bureaus also help with ushering in financial inclusion in a variety of ways, such as collecting data on individuals who may be new to credit and allowing lenders to offer them reasonably priced credit and improving financial literacy by offering a wealth of information to prospective borrowers.

Now that you know more about credit bureaus in India, you can check your credit score and report for free once a year from any of these agencies. Make sure you monitor your score as this helps you get on the path towards financial well-being.

Disclaimer: This content is part of a marketing initiative. No TNIE Group journalists were involved in the creation of this content.