We often talk a lot about credit bureaus and know that they are responsible for generating our credit scores. The credit information provided by these bureaus is used by various providers and businesses who want to assess the financial health and background of an individual. Let’s take a closer look at the prime functions of the credit bureau and the top credit bureaus in India.
What are Credit Bureaus?
Credit Bureaus are agencies that gather aggregate credit information from various data providers and compile credit reports. They then sell this information to creditors, lenders, financial institutions and consumers and derive credit scores to assess the creditworthiness of an individual.
Credit bureaus, although are private companies, are largely regulated by the RBI. They play a critical role in deriving your credit scores based on previous credit history and impact the size of the loan you can qualify for, the interest rates for loans or credit cards and can also serve as a background check.
Real Purpose of Credit Bureaus
Credit bureaus team up with creditors and lending institutions to help them accurate loan decisions. The key purpose of credit bureaus is to provide institutions with reliable credit information that can assist with ascertaining the creditworthiness of the borrower. That being said, credit bureaus are not responsible for making the final decision; they simply synthesise and supply credit information to their clients.
Their clients typically include banks, finance lending companies, credit card providers, mortgage lenders, etc. Consumers can also fetch their credit reports by visiting the individual credit bureau’s portal and keep a tab on their credit scores. Most credit bureaus calculate the credit score based on complex algorithms and data modelling techniques based on five critical components of credit, repayment history, credit exposure, age of credit and credit inquiries.
Top 6 Credit Bureaus in India
Here are the top credit bureaus in India:
A global credit bureau agency has its corporate headquarters in Dublin and promotes itself as a premier global information services provider. It operates around 17 consumer credit bureaus and 11 commercial credit bureaus to provide a granular risk view of the customer.
Besides, it offers access to a comprehensive database including banking, trade data, legal items, third party collections and more to assist institutions to make informed decisions. It employs a range of modelling techniques to collect and combine data to arrive at a bespoke credit score that can be incorporated into existing processes and facilitate seamless automation of your decision-making to reduce underwriting costs.
2. TransUnion CIBIL
One of India’s leading credit information companies, it was incorporated in the year 2000 based on recommendations made by the RBI Siddiqui Committee and has one of the largest collections of consumer databases. It has over 5000 plus members including leading banks, NBFCs, housing finance companies, etc. and maintains credit records of over 1000 million individuals and businesses.
The CIBIL score is a reliable metric for creditworthiness and is India’s first generic risk scoring model for banks and financial institutions which was introduced in 2007. It was in the year 2017 that TransUnion acquired a stake in it and the CIBIL TransUnion Score was later launched.
Another global player, Equifax is headquartered in Atlanta and was registered as a credit information company in 2010 in Mumbai as a joint venture between Equifax Inc. and seven leading financial institutions in India. They have access to the best and unique data to empower businesses to make the right decisions. They also provide analytical capabilities to deliver added knowledge with clever insights, greater flexibility and faster time to market.
Crisil is an S & P global company and pioneered credit rating in India in 1987. It is a full-service rating agency that serves lenders, investors, issuers, market intermediaries and regulators by covering manufacturing companies, banks, NBFCs, PSUs, financial institutions, state governments, urban local bodies, and mutual funds. Their ratings are touted to be benchmarks for pricing and trading of debt instruments for markets at large.
5. CRIF Highmark
CRIF India is one of India’s leading credit information providers. It has an extensive bureau database that caters to banks, NBFCs, insurance companies, telecom service providers amongst others. It is a pioneer of India’s first Microfinance Bureau database which is now the world’s largest microfinance bureau database. It leverages sophisticated made in India search algorithms and teamed up with CRIF in mid-2014. It now enjoys a global presence that brings the best of comprehensive data and sophisticated dedupe technology for India along with global best practices, expertise in scoring and top-rated credit management software solutions that aims to add more value to their clients.
ICRA, formerly known as Investment Information and Credit Rating Agency of India Limited, was established in 1991 as an independent investment information and credit rating agency. Later on, ICRA and its subsidiaries formed the ICRA group which is now listed in BSE and NSE. It is a Moody’s Investors Service Company and is powered by the technical services of Moody’s with access to Moody’s global research base. It has its headquarters in New Delhi and also provides analytics and digital platforms for risk management, market data, consulting and knowledge services.
Differences Between the Different Credit Bureaus in India
The key differences between the above credit bureaus lie in their provision of various products and services. They all provide instantaneous credit reports if requested online and are licensed by the RBI. The credit score can vary between each bureau as each company has its unique algorithm to aggregate and compute credit ratings.
Typically the credit score can range from 300 to 900, where 900 is the highest and 300 is the lowest. Thus the higher the credit score, the better the financial prospects of the individual. While for consumers instant credit reports may be readily available, one can get a credit report of a business or firm with additional time up to 1 week to process the entire credit report.
Finezza provides an industry-leading credit bureau data analytics platform with integrations into four main credit bureaus of CIBIL, CRIF, Experian and Equifax. As a result, the institution can gain access to multiple data sources of credit information through a singular system to highlight the complete financial picture and accurate risk assessment of the borrower.
The platform provides credit-focused grouping and alerts for pinpointing risks and a complete summary of loan history so that lenders can make well-informed loan decisions and avoid the risk of bad loans and NPAs.