Hey guys!
Have you all wondered why a loan application gets cancelled? Why the loan amount that you applied for is not sanctioned, but a lower amount is sanctioned? Have you wondered how bankers track your loan repayment record?
Credit Information Companies (CIC):
The banks decide on the loan sanction based on the credit rating given by the Credit Information Companies (CIC) in India. CIC are third party institutions that collect financial data regarding loans, credit cards and more about individuals and share it with its members. Banks, Non-Banking Financial Companies (NBFC) are usually the customers of CIC. The CIC collects financial information about all these individuals and forms a credit report based on their financial history.
CIC in India is licensed by the Reserve Bank Of India (RBI) and governed by the Credit Information Companies Regulation Act, 2005 and various other rules and regulations issued by the Reserve Bank of India. Following the CIC Regulation Act, 2005, the RBI and the Indian Government enacted the CIC Act, 2006.
List of Credit Information Companies in India:
There are precisely four famous CIC in India as of now. They are:
CIBIL
Equifax
Experian
CRIF High Mark
CIBIL:
CIBIL stands for Credit Information Bureau (India) Limited. The credit score released by CIBIL is called as CIBIL score. It is India's first and the oldest Credit Information Company. In 2000, it partnered with US-based TransUnion and so it is now called as TransUnion CIBIL Ltd. It adheres to the Credit Information Act of 2005 and it records the repayment of loans and credit cards by both individuals and companies. CIBIL credit score ranges from 300 to 900.
Good score: 750 and above
Average score: 550 - 700
Poor score: 300 - 549
Equifax:
Equifax is a global data, analytics and technology company. It is headquartered in Atlanta and it operates or has investments in 24 countries. It is registered in India as Equifax Credit Information Services Private Limited (ECIS), and is headquartered in Mumbai. It adheres to the Credit Information Companies Act, 2005. Equifax credit score ranges from 300 to 900.
Good score: 750 and above
Average score: 580 - 669
Poor score: 580 and below
Experian:
Experian is one of the world's foremost credit information services. It is licensed by RBI and adheres to the Credit Information Companies (Regulation) Act 2005. It operates two firms within India namely:
Experian Credit Information Company of India Private Ltd
Experian Services India Private Ltd
Experian has tied up with more than 2900 financial institutions, including public sector banks, telecom companies, micro finance institutions and non-banking financial companies(NBFC). Experian credit score ranges between 300 and 850.
Excellent score: 800 and above
Good score: 700 and above
CRIF High Mark:
CRIF High Mark is India's first full service credit information bureau which comprehensively covers credit information for all borrower segments. It got registered in 2010 and commenced its operations immediately in March 2011. CRIF High Mark has three offices in India - headquarters in Mumbai, development and operations center at Pune and a sales office at Chennai. CRIF High Mark credit score ranges from 300 to 900.
Good score: 700 and above
Poor score: 350 and below
Rules and Regulations for CIC's:
According to the Credit Information Companies Regulation Act, only certain entities are allowed to be members of the Credit Information Companies. A CIC, a credit institution or any authorised individual can request a credit report anytime. A CIC will adapt to a format approved by the RBI and furnish the requested information within a given time.
If there is any dispute between the CIC and its member related to the credit information provided, it shall be settled by conciliation under the Arbitration and Conciliation Act, 1996.
Access to the Reports:
Credit grantors
Insurance companies
Collection agencies
Employers with the permission of the concerned of the individual
Bottom Line:
CIC collates information regarding the credit behaviour of loan applicants from banks. This means that if you have ever taken a credit card or loan, your name will most likely be in the database of the CIC. Your month-on-month payment behaviour on loan EMIs and credit card dues will be recorded. It is important to note that any information that is not relevant to the individual's credit behaviour, like salary, savings accounts, fixed deposits, other investments, etc., are not shared.
CIC does not give recommendations as to whether the loan needs to be given or not. Based on the recommendation given by CICs, the lenders take this decision.
I hope you understood how important is the role of credit score in getting you a loan. In the next read we will elucidate about the ways you can maintain a decent credit score.
Until then you know the drill...
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