Credit Information Bureau

Dr Preeti Bedi

A credit bureau collects and researches individual credit information

and sells it to creditors for a fee, so they can make decisions about
granting loans.

● Credit bureaus assign credit scores to individuals based on the

credit history that they assemble.
● Credit scores are important predictors of whether or not you will
qualify for credit and on what terms.
● Credit bureaus do not decide whether or not you will get
credit—they merely collect and synthesize information
regarding your credit risk and give it to lending institutions.
Credit bureaus, also known as credit reporting agencies. A credit
bureau tracks the credit history of borrowers in order to generate
credit reports and credit scores. Financial companies buy this
information to help them determine the credit risk of their customers
and make decisions about extending them credit.
Credit bureaus research the credit history and behavior of borrowers.

Credit Rating and Credit Bureau :

credit bureaus and credit rating agencies are not the same. Credit
rating agencies are mainly for investors seeking to assess the risk
factor involved in investing in or lending to a company or
organization. On the other hand, credit bureaus are for collecting
information on individuals and disseminating this information in the
form of a credit report to lenders based on which the latter determine
the creditworthiness of the individual and whether to extend credit to
them.

List of recognized Credit Bureaus in

India
While the first credit bureau in the world was founded in the late
19th century, in India, it was only in the year 2000 that the first credit
bureau was established under the auspices of the Reserve Bank of
India. Eventually, other global credit bureaus made their way to India.
They were granted recognition by the Securities and Exchange Board
of India (SEBI), the Government of India’s regulator of the securities
market in India.

● CIBIL (300-900)

TransUnion CIBIL Limited is formerly known as Credit

Information Bureau (India) Limited (CIBIL).

Credit Information Bureau (India) Limited (CIBIL) is a credit

bureau or credit information company, engaged in maintaining the
records of all the credit-related activities of companies as well as
individuals, including credit cards and loans.
The registered member banks and several other financial
institutions periodically submit their information to CIBIL. Based
on the information and records provided by these institutions,
CIBIL issues Credit Information Report (CIR) and credit score
to applicants and financial institutions.
It provides data to the banks and other lenders to quickly and
efficiently filter the loan applications which they receive in the
course of their business.
The TransUnion Credit Information Bureau (India) Limited, more
commonly known as CIBIL, is the most widely recognized credit
bureau in India. Founded in 2000, CIBIL is said to maintain the
credit history of over 600 million Indians as well as 32 million
business organizations. CIBIL was the first credit information bureau
in India to be founded by the Reserve Bank and India and later
partnered with the Chicago-base TransUnion International Inc.
TransUnion CIBIL provides comprehensive reports based on the
credit statements of an individual as well as commercial borrowers to
its recognized partners. Individuals may obtain market insights, a
credit score (known as the CIBIL TransUnion Score), credit
information, and other reports. In contrast, companies can obtain
portfolio reports, company credit information, CIBIL Bureau analyzer
reports, and others.
Experian

Experian was established in 2006 and permitted a fully operational

license in 2010. They provide a credit rating from 300 to 850.
Experian Credit Score is a numeric summary derived from your
repayment history of previous or existing loans and credit cards and
from the enquiries performed by banks & financial institutions based
on your loan application. Your Credit Score is based on the
information in your credit information report. Higher the score, the
more favourably it is viewed by banks and financial institutions.

● Equifax

One of the three largest credit bureaus in the world, Equifax, was
initially established in 1899 as a retail credit company. It was only in
2010 that it obtained a fully functional license to operate as a credit
bureau. For individuals, Equifax offers credit scores, risk scores,
portfolio scores, and others, with ratings from 300-850.
Again, for companies and businesses, credit fraud reports, portfolio
management, risk management reports, industry diagnosis, and other
reports may be obtained.
CRIF Highmark:
CRIF Highmark is one of the four Credit Information Companies
(CIC) in India. The company has a predominant presence in Europe
and India. Founded in 2007, High Mark received a licence to operate
as a credit bureau in 2010 from the Reserve Bank of India (RBI).
CRIF acquired a majority stake in High Mark in 2014, following
which the name in India was changed to CRIF High Mark. CRIF High
Mark score ranges between 300-900, 900 being the highest. The
credit score predicts the probability of an individual's’ default within
the next 12 months. A credit score close to 900 indicates that an
individual is less likely to default the credit.
Here’s How CRIF High Mark Credit Score is Divided:
● 300–500 (very low): This score indicates that the customer is
at a high risk of defaulting credit and has a bad track record of
repayment and poor credit history. There is a high possibility
that lenders will not provide credit to such customers.
● 500–650 (low): A score in this range indicates that the
customer has a low score and has delayed and defaulted on
payments. Customers who have not been prompt in making
payments are still a risk for lenders and hence some of them
may not provide loans to such customers.
● 650–750 (great): Generally, lenders like banks and
non-banking finance companies consider a credit score of 750
as ideal. Customers having a score in this range have usually
displayed a good repayment behaviour. Moreover, they are
also likely to maintain a good balance of secured and
unsecured credit score. Such type of customers are ideal for
lenders as they have a low risk of defaulting.
● 750-900 (excellent): Customers having a credit score in this
range are considered to be extremely dependable in terms of
credit as they have displayed an excellent repayment
behaviour and have never defaulted on payments. They have
an impeccable record of paying off all the dues and using the
credit wisely. Lenders are willing to offer loans to such type of
customers.
Product and Services offered by CRIF High Mark
CRIF High Mark offers several products and additional services for
consumers and companies.
For Consumers:
● Credit score
● CRIF High Mark Credit Information report: A consumer
credit report has all the information about their accounts,
credit history and repayment behaviour. The credit reports
help banks and NBFCs to measure creditworthiness and ability
of an individual to repay the credit.
● Microfinance credit reports: It provides a detailed track
record of all group loans taken by individuals from lenders
such as banks, NBFCs, and Microfinance Institutions (MFIs).
Microfinance Credit Reports are generated using advanced
Identity Resolution engine. CRIF’s Microfinance Credit
Report can be accessed via Member Portal (HUB) as a single
report. CRIF High Mark launched India’s first Microfinance
database in March 2011 which the company claims is the
world’s largest microfinance database with more than 80
million borrowers.

For Companies:
Commercial Score
Identification and Anti-Fraud services
Predictive Analytics & Scorecards
The criteria used by CRIF Highmark to generate a credit report:
1. Current outstanding debts.
2. Repayment history.
3. Credit utilisation ratio
4. New loan applications
5. Debt to income ratio.
6. Credit mix
7. Length of credit history, etc.
Simple ways you can adopt for a better credit score:
1. Make sure that all of your outstanding dues are paid on time.
2. For your credit card, maintain the credit utilisation ratio below
30%.
3. Having a good credit mix has a positive impact on your credit
score.
4. Avoid applying for multiple credit cards.
5. Avoid closing old credit card accounts. Try to maintain them
with minimum transactions.
6. Keep a check on your credit score, especially before making
major financial decisions like applying for a loan.
7. Avoid missing payments

Product offerings by CIBIL

CIBIL offers three products viz. credit score, a credit report for
individuals and credit report for companies:
Credit score
A credit score refers to a 3 digit numeric value that represents the
creditworthiness of an individual. The creditworthiness ranges
between 300 to 900 with 900 being the highest and 300 being the
least. This score is computed with the help of the credit history of an
individual.

Banks and most financial institutions prefer extending credit to an

individual whose score is 750 and more. Individuals with good credit
scores are less likely to default on their loan payments.
Credit report
The credit report contains the credit information that CIBIL fetches
from various financial institutions. This detailed report contains
information about an individual’s history of borrowing and repayment
routine, including defaults and delays.
The important parts of this report are credit Score, individual’s
personal information, employment details, contact information and
account details.
The CIBIL Report generally has detailed information on the credit
you have availed, such as home loan, auto loan, credit card, personal
loan, overdraft facilities.

Other than the CIBIL Score, these are the key sections in the CIBIL
Report, according to the CIBIL website.

Personal information: Contains your name, date of birth, gender and

identification numbers such as PAN, passport number, voter's number.

Contact information: Address and telephone numbers are provided in

this section, up to four addresses are present.

Employment information: Monthly or annual income details as

reported by banks and financial institutions.

Account information: This section contains the details of the credit

facilities availed by you including name of lenders, type of credit
facilities (home, auto, personal, overdraft, etc.), account numbers,
ownership details, date opened, date of last payment, loan amount,
current balance and a month on month record (of up to three years) of
your payments.

Credit report for companies (commercial borrowers)

Credit report for companies constitutes details about a company’s
credit history. The several segments in a company credit report speak
about potential lenders, existing credit which the company has, any
pending lawsuits and outstanding amount.
A good credit report is essential for approval of any loans, whereas a
bad report could damage/reduce the chances of the loan being granted
to the company.
Other Products offered by CIBIL
Visit https://www.transunioncibil.com/product/all-products#
● CIBIL Microfinance Report: The CIBIL Microfinance Report is a
first-of-its-kind universal report that enables microfinance institutions,
banks and non-banking financial companies to make better-informed
credit decisions.

With a robust search-and-match algorithm, the report aims to provide you

with a 360-degree view of your customers. It bridges the gap between
the two segments of India’s credit industry to give a consolidated picture
of each borrower in the country— including those in the unbanked
population—to enable financial inclusion. Optimize your underwriting
process with comprehensive information that’s powered by an exhaustive
bureau database and presented in a single report.

● Credit Vision Score (CVSCORE): Also known as CIBIL VERSION

3. It is an improvement to current traditional credit score. It has more
predictive power as it considers past records of previous 36 months.
Earlier only 24 months were considered.

While credit score has long been considered paramount to judging a

borrower’s creditworthiness, it has left unaddressed several concerns,
such as how the creditworthiness of a first-time borrower may be
calculated. In a bid to address this gap, TransUnion CIBIL recently
introduced an eligibility score, called the CreditVision score, to offer new
borrowers the opportunity to seek loans.

With the CreditVision risk score, banks and other credit institutions will
be able to credibly evaluate the creditworthiness of new-to-credit (NTC)
borrowers. Post introduction of the CIBIL CreditVision score, it has now
become easier than ever to avail loans from established banks and other
financial institutions. CreditVision seeks to offer credit to borrowers with
little or no prior credit history, the score ranges between 101 to 200.
Similar to the CIBIL score, the higher a borrower’s credit rating, the
lower are the odds of the borrower defaulting on credit payments.
(CreditVision® Score leverages the power of trended data, such as
change in slope of consumer balances, revolving – transacting history on
 Card trades, behavior of excess payment, part payment on all trades,
velocity (rate of change) of new loan uptake and payment ratios, as a
continuous concept rather than discrete attributes over the last three years.
This, in addition to the traditional credit attributes, provides a better
prediction of risk in the changing retail lending environment. Improved
data quality and enhanced length & depth of data insights also help
provide risk information on hitherto (until now) unscored individuals,
thereby enabling you to score better & score more.)

Factors influencing a CIBIL score (start from here in Sec

A)

What is CIBIL Score?

CIBIL score is one of the most important factors that almost every
financial institution check when they receive credit application from
individuals. TransUnion CIBIL has affiliations with almost every
bank to gauge the creditworthiness of millions of individuals and
enterprises. A high CIBIL score denotes not only your excellent
financial discipline but also your integrity. Every time you apply for a
loan or a credit card, your recent score (last six months) is checked.
Generally, any score above 700 is considered excellent, though some
banks keep the bar high and some do not mind lowering the standard.

Who Computes the CIBIL Score?

TransUnion CIBIL is a credit bureau or credit information company,
incepted in 2000, the first of its kind in India. The firm computes the
CIBIL score of individuals based on the consumer information stored
in their repository. They are known for their accuracy and
transparency in the calculation of the score.
How to Check Credit Score?
https://cleartax.in/s/cibil-credit-report
Factors influencing a CIBIL score
Repayment History
A repayment history with EMI defaults or late payments could
negatively affect your credit score. The bank takes note of whether
you repay the debt on time. If you make an effort to repay in advance,
then it is seen as a positive sign. This shows that you can be trusted to
repay the amount you owe.
Debt to Income Ratio (DTI)
Generally, lenders don’t encourage people to take more debts, say
around 40% of their income. So, DTI is used to gauge a loan
applicant’s ability to repay based on his/her income. It is an excellent
metric to inculcate financial discipline as well as to ensure that you
can repay your future EMIs without feeling burdened.
Drastic Increase in Credit
As an earning individual, you may have a specific credit limit
(whether it is for a loan or credit card). However, using them to the
brim (to the full) indicates credit hungry behaviour and banks see
them as red flags. If you maintain a certain credit level each month,
but suddenly seen spending significantly more, then it can result in a
reduced score.
Financial experts suggest that individuals should try and keep the
credit utilization ratio in the range of 25-30 % for maintaining a good
CIBIL score report.
Excess Personal Loans/Credit Cards
Credit cards and personal loans both are unsecured loans. Too many
credit cards and a high amount of personal loans with no secured
loans could have a negative impact on your CIBIL score.
So, if you have a balance of both the secured as well as unsecured
loans, it might lead to a positive impact on the CIBIL score
Numerous Existing Loans
Having too many loans in your name will always be a matter of
concern to lenders – like a home loan, a couple of personal loans, a
vehicle loan and credit card(s) on top of them. It is always better to
close one before availing the next. Focus on closing the smaller loans
as soon as possible.
What is the Importance of CIBIL Credit Score?
A CIBIL score is like a scorecard for your financial integrity. It is an
indicator, which tells a lender either ‘yes, you can give the loan’ or
‘no, it doesn’t look like he/she will repay on time’. The following are
the reasons why you should always keep your CIBIL score high.
For secured loan approval
There is a misconception that it is easy to avail secured
finances such as home loans and auto loans, as you will be
providing the lender with some security. However, your credit
track record will still be looked into by the lender. This is how
they decide on the upper limit and the interest rate. With a
poor CIBIL score, the overall process can get complicated.
Quicker approval of unsecured loans
A clean chit from TransUnion CIBIL, when it comes to credit
score, is of the utmost significance when you apply for loans
without any security. Like personal loans, for instance. For a
borrower with a high CIBIL score (say 750+), it is easier to
get it sanctioned. If your score is above 800, then you might
even get a higher amount than generally given by a bank.
More bargaining power on interest rates
Are you aware of the fact that the interest rates vary for
different loans at different banks? Some people end up getting
a better deal than others. A higher CIBIL score enables you to
bargain with banks for a better rate or deal. You can easily
compare the offers from lenders and authoritatively negotiate
as creditworthy customers are assets for any financial
institution.
A lesser premium for insurance
Insurance is another financial instrument that rides mainly on
trust and credibility, whether it is life cover, medical
insurance, or others. Your repayment history, claims history,
and general handling of debts and dues – all these are tracked
carefully by the insurance companies. This helps them
determine if you can enjoy a lower premium compared to
others policyholders with a low credit score.
Chance and choice to pick the best credit card
Credit cards, if used smartly, can give you a host of benefits.
Though they allow a definite zero-interest period, the interest
rates can shoot up drastically when you delay or miss a
payment. With a better-than-good CIBIL score, credit card
companies will vie with one another to give you the best
possible deal. Otherwise, you can end up with a credit card
with a ridiculously high-interest rate or a rejection.
Determine the terms and conditions on which borrower
will receive the loan
WHAT IS THE DIFFERENCE
BETWEEN CREDIT SCORE AND
CIBIL SCORE?

What is Credit score?

A credit score reflects the creditworthiness of potential

borrowers. It is calculated after taking borrower’s credit
history, including the number of credit accounts, total debt and
repayment history, into consideration. Also, the number of
enquires made (applications for a loan or a credit card) is
considered while calculating a credit score.
A part of an important metric system, the score is used by
lenders to depict the probability of the borrower repaying the
debt on time. Notably, your odds of getting a loan or a credit
card increase if you have a high score. Similarly, a lower
credit score can turn away lenders in no time. A credit score is
not only employed as a risk grading mechanism for evaluating
loans, but also for setting interest rates. Therefore, your score
can help you save a lot of money while availing a loan from
financial institutions.
There are several credit bureaus, and each one functions
differently. They are; TransUnion CIBIL, Experian PLC, CRIF
Highmark, and Equifax Inc.

CIBIL SCORE

People often confuse credit score with CIBIL score. They wrongly use it
interchangeably. The Indian Government has authorised four credit
rating agencies to assess credit scores of individuals. They are;
TransUnion CIBIL, Experian PLC, CRIF Highmark, and Equifax Inc.
Out of these, TransUnion CIBIL is the most popular credit rating agency.
CIBIL score is one of the most important factors that almost every
financial institution check when they receive credit application from
individuals. TransUnion CIBIL has affiliations with almost every bank,
gauging the creditworthiness of millions of individuals and enterprises. A
high CIBIL score denotes not only your excellent financial discipline but
also your integrity. Every time you apply for a loan or a credit card, your
recent score (last six months) is checked. Generally, any score above
700 is considered excellent, though some banks keep the bar high and
some do not mind lowering the standard.

Credit Score is a score which can be given by any credit bureau

whereas CIBIL score is a score given by TransUnion CIBIL.
Benefits of good Credit Score

Low Interest Rates on Credit Cards and Loans

The interest rate is one of the costs you pay for borrowing money and the
interest rate you get is often directly tied to your credit score. If you have a
good credit score, you’ll almost always qualify for the best interest rates, and
you’ll pay lower finance charges on credit card balances and loans. The less
you pay in interest, the sooner you'll pay off the debt, and the more money
you'll have for other expenses.
Better Chance for Credit Card and Loan Approval
Borrowers with a poor credit history typically avoid applying for a new credit
card or loan, because they've been turned down previously. Having an
excellent credit score doesn’t guarantee approval, because lenders still
consider other factors such as your income and debt. However, a good credit
score increases your chances of being approved for new credit. In other
words, you can apply for a loan or credit card with confidence.
More Negotiating Power
A good credit score gives you leverage to negotiate a lower interest rate on a
credit card or a new loan. If you need more bargaining power, you can take
advantage of other attractive offers that you’ve received from other companies
based on your credit score. However, if you have a low credit score, creditors
are unlikely to budge on loan terms, and you won't have other credit offers or
options.
Get Approved for Higher Limits
Your borrowing capacity is based on your income and your credit score. One
of the benefits of having a good credit score is that banks are willing to let you
borrow more money because you’ve demonstrated that you pay back what
you borrow on time. You may still get approved for some loans with a bad
credit score, but the amount will be more limited.