Arun Thukral, MD, CIBIL, Credit Information Bureau (India) Limited, talks about the importance and limitations of credit information reports.
When will we be able to access our own credit scores?
We are currently developing the infrastructure, systems and processes that would be needed to give individuals direct access to their credit information reports or CIRs. This will be in place by the end of this financial year. The CIR will give a factual snapshot of an applicant’s credit history and payment records. As for the fee structure, according to the Credit Information Companies Regulations (CICR) Act, 2005, the maximum fee that can be charged for a CIR is Rs 100.
The CIR does not contain the details of a borrower’s assets and investments. Given its bearing on an individual’s repayment capacity, shouldn’t this be factored in?
CIBIL provides credit information about borrowers based solely on the data that has been made available to it by its members. This factual information, both positive and negative, is provided to its members in the form of risk management tools like CIRs, portfolio review reports, Cibil TransUnion Score, etc. Though these tools are important inputs for a lender to decide on credit disbursal, factors like the borrower’s income, occupation, net worth, other lines of credit, etc, are also considered.
Does this mean that if one bank denies credit to a person, another bank can take a different view?
When it comes to offering credit, every financial institution has its own level of risk appetite, which is based on its credit and risk management policies. The CIR is used as a part of its due diligence procedure. So, yes, credit lenders can take different views on a particular CIR and use the information for their decision-making differently. Cibil does not pass any value judgements and it is up to the financial institution to sanction a loan or credit.
Now that RBI has directed banks to issue credit reports to customers on request, what is the incentive for customers to go to Cibil directly?
Customers can get their reports from a credit institution only if they have applied to it for credit. However, they will be able to access their CIRs from Cibil whenever they want. Also, the Cibil report that credit institutions access is tailored for them. An individual will need to see a report that is in a consumer-friendly format and can be understood more easily. The CICR Act enables transparent and active information sharing. It helps boost a sound credit culture, which translates into economic growth.