In today's world of instant loans and credit cards, it's no surprise that credit scores are more important than ever. A healthy credit score makes it that much easier to obtain loans or access higher credit limits at competitive rates of interest whenever needed. Lenders are less likely to hassle a potential borrower who has a good credit score.
But have you ever wondered what goes on behind the calculation of those all-important scores? For that, we need to know about credit bureaus.
Credit bureaus are agencies that collect and analyse data pertaining to the credit transactions of an individual or business. These credit transactions include information such as which credit cards were used, loans that were taken, and their repayments. Timely payment of bills and income tax data also fall under their purview.
Where do they get all this information from? It's sourced from agencies that specialise in data collection, money collection, as well as lending companies, among various other entities and outlets.
Once all this information is collected and analysed, a credit bureau can begin to put together a profile of the person. His or her creditworthiness factors in traits like default history and repayment behaviour, among other things.
Based on the financial information collected about a person or entity by the credit bureau, it assigns them a credit score. They can be broken down as follows:
750 or more: An excellent credit score and attests to highly responsible financial behaviour
600-750: A medium score. It attests to a financial behaviour that’s not averse to the occasional risk or two. The score could be down to factors such as missed payments, missed or late filing of income tax reports, or a considerable amount of debt. Timely payments of any outstanding equated monthly instalments (EMI) and cutting down on outstanding loans can easily raise the score back up.
Below 600: A poor credit score. Individuals with scores this low have to think quickly and make a few major decisions to improve their credit score. Not doing so could make them credit-ineligible in the future.
There are four credit bureaus in India, and here’s a detailed look at each one:
Experian was established in 2006. In 2010, they became the first credit bureau to secure a license under the Credit Information Companies Regulation Act of 2005. Aside from providing its own brand of credit report and credit score, Experian India also provides risk scores and portfolio scores.
Experian's credit score rating lies between 300-900 and their reports are generally on the less expensive side.
TransUnion Credit Information Bureau
Another credit bureau to obtain a license in 2010 was the TransUnion Credit Information Bureau (India) Limited, or CIBIL. Founded in 2000, they cover analysis for both individuals and organisations. Their credit score rating ranges between 300-850. For companies and similar entities, CIBIL assigns what they call PERFORM score.
CIBIL is India's most well-known credit bureau and they maintain the information of over 1000m individuals and entities. It consists of three main divisions - Commercial Bureau, Consumer Bureau, and Micro Finance Institution Bureau - which collects all the information needed.
Aside from Credit Information Reports and CIBIL Scores for individuals, CIBIL also produces CIBIL Ranks and CIBIL Commercial Reports for enterprises. Their members include most major banks and NBFCs, as well as housing finance companies and institutions.
As a company, Equifax dates back to 1899. However, Equifax India, headquartered in Mumbai, is a joint venture between Equifax Incorporated, USA and seven of India's top financial institutions. They have been registered as a Credit Information Company in India since 2010.
Equifax's credit score rating ranges between 1-999. Along with credit scores for individuals, they also provide risk scores and portfolio scores. And for companies, Equifax provides portfolio management, credit fraud reports, risk management reports, and overall industry diagnosis, among various other reports.
CRIF High Mark
Like the rest of the four credit bureaus, CRIF High Mark also obtained its license in 2010. However, what separates it from the rest is that it is the only one approved to operate by the Reserve Bank of India.
Both individuals and corporates are covered under CRIF High Mark's credit rating analysis and their credit score rating ranges between 300-850.
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Simply download the app, register by uploading a handful of documents, and post-approval, borrow instant personal loans of up to Rs. 30,000, based on your credit score and your repayment history. mPokket loans for students and loans for salaried are both credited straight to your bank or Paytm account.
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