Credit Bureaus in India

What Are Credit Bureaus and How Do They Work?

Know All About Credit Bureaus: Top Five Credit Bureaus, How do they Work, How they develop Your Score and More.

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What is a Credit Bureau?

A credit bureau is an organisation that looks after the collection and research in the field of individual credit information. The credit bureau further sells this information to creditors for a certain fee to help them make decisions regarding extending credit or granting loans to the individuals.

The Top 5 Credit Bureaus in India

Let us know in detail about the top five credit bureaus in India:

  • TransUnion CIBIL

  • CRIF High Mark

  • Experian

  • Equifax

  • CRISIL

1. TransUnion Credit Information Bureau (India) Limited or CIBIL

TransUnion CIBIL was established in 2000 and is one of India's most popular credit bureaus. It manages the credit record of more than 32 million companies and around 600 million individuals. CIBIL was established by the Reserve Bank of India (RBI). It later merged with the Chicago-based organisation known as TransUnion International and has been renamed TransUnion CIBIL.

 

You can check your CIBIL score conveniently using the online portal of TransUnion CIBIL. The scores vary between 300 to 900. The major factors impacting your overall credit score are your credit utilisation pattern, credit repayment history, and the credit inquiries made over a certain period. If you possess a healthy credit mix and flawless debt repayment history, your CIBIL score would be on the higher side.

2. CRIF High Mark

CRIF High Mark was founded in 2007 and was awarded the licence in 2010. The unique factor of CRIF High Mark is that it is the only credit bureau that is approved to operate by the Reserve Bank of India. CRIF credit bureau assigns credit ratings for both corporates as well as individuals. The credit score rating given by this credit bureau falls in the range of 300 to 850.

3. Experian:

Established in 2010, Experian is known as one of the first credit bureau of India to be assigned a licence under the Credit Information Companies (Regulation) Act, 2005. Like CIBIL, Experian assigns its credit reports and credit scores ranging from 300 to 900. An Experian credit report generally carries statistics concerning the loan type, date of loan disbursement, repayment history, outstanding balance, and payment defaults. Experian also offers marketing services and analytical tools to its corporate customers and individuals, which supports them in making well-informed credit decisions.

4. Equifax

This credit bureau was initially a credit-giving company when it started in 1899; then, in 2010, it became a licensed agency that carries out credit ratings. The credit score rating given by Equifax generally varies from 1 to 999. Equifax also assigns portfolio scores and risk scores along with credit scores for the individuals. Companies or corporate customers also generate risk management reports, credit fraud reports, industry diagnoses, and other portfolio management reports that they might require as per their specific needs.

5. CRISIL

CRISIL stands for Credit Rating Information Services of India Limited. CRISIL is a well-known global analytics business that provides services in the financial markets, which in turn helps them to function efficiently in the most transparent manner. It functions on the principle of swift and innovative functions. CRISIL credit bureau also assists in the field of data research along with providing credit ratings. Being a credit rating agency, through its analytics expertise CRISIL also provides the required assistance to financial services, consulting businesses, commercial and investment banks, and insurance companies.

 

There are few other credit bureaus in India like the ICRA Limited, Credit Analysis and Research Limited (CARE), Brickwork Ratings (BWR), and India Rating and Research Private Limited. However, the credit bureaus discussed above are among the top credit bureaus in India.

How do Credit Bureaus Work?

Credit bureaus collaborate with the different lending institutions and credit providers to support them in making decisions related to loan approval. The primary objective of credit bureaus is to ensure that credit providers have all the required information for making decisions related to loan approvals for individuals and corporations. Generally, the clients for the credit bureau agencies consist of credit card issuers, banks, mortgage lenders, and other firms which deal in personal finance and lending sectors.

 

Credit bureaus have no say in deciding the credit grants to the individuals or corporates; they majorly focus on collecting and generating statistics and other information related to the credit score of individuals or organisations and extend that information to the lenders, which in turn make the decision. 

Credit Bureau Regulations

The Credit Information Companies (Regulation) Act, 2005 is a legislation passed by the Government of India to regulate the functions of credit information companies that operate in India. This act also supports the efficient distribution of credit to credit-worthy applicants and helps lenders make decisions regarding all credit disbursement matters.

 

Credit information generated by the credit bureaus and other credit information companies can be shared with the specific parties for utilisation with regards to the following main functions: -

 

  • To make the credit decisions highly effective.

  • To find out the concurrent borrowers and loan defaulters.

  • To support in maintaining the minimum levels of adverse selection of customers.

  • To carry out the risk analysis of the customers.

  • To help maintain the statutory and regulatory functions in the credit sector.

  • To enable the individual consumers to know about their credit information.

Do You Need All 5 Scores

There is no definite answer as to which credit score matters most to the lending agency for deciding the loan approvals. Also, whether all the five credit scores are required or the lenders prefer some specific ones, that also cannot be clearly demarcated. Generally, the lenders have their own favourite scores on which they rely for the decisions related to loan approvals.

Difference Between Credit Rating Agencies and Credit Bureaus

While Indian credit rating agencies (CRAs) calculate the safety factors or risks in the investment options provided by the companies; whereas, credit bureaus, also known as credit information bureaus, generate the credit scores and reports concerning the borrowers in the country. Credit bureaus are involved in evaluating the borrowers' creditworthiness and debt repayment worthiness which supports the lenders in assessing the risks better.

 

Although both the credit rating agencies and credit bureaus generate financial information for individuals and organisations, the type and details of the information generated vary. Furthermore, the entities described by those statistics and the agencies that use this information are from varied sectors.