Published on Dec 24, 2020Updated on Jul 26, 2023
Credit Bureaus in India and all over the world - have a primary purpose - which is to analyse the financial transactions specifically loans due and their payments for people as well as businesses. The bureaus then give Credit ratings or scores based on this study. These Credit scores /ratings are an integral part of the loan process and are heavily relied upon by lending institutions such banks, NBFCs and so on. . Lenders check the credit score of each applicant before giving loans. Let’s understand what Credit Bureau and Credit rating means.
Credit Bureau is an agency which collects and analyses data related to a person or a business entity’s transactions which are made on credit. These include loans taken, credit cards used, overdraft facilities, etc. and their repayments.. This analysis may also include the data regarding income taxes, timely payment of utility bills and so on. The information is collected from lending companies, data collection agencies, money collection agencies and various others. The purpose of collecting and analysing such information is to create a profile of the creditworthiness of the person which includes repayment behaviour, default history, and overall financial behaviour (debt to income ratio).
The Credit bureaus in India collect financial information about a person / entity which is analysed after which, a credit score is given to the person / entity. This credit score is a number that may be between 300 to 900. The score can be analysed as follows:
A good credit score is essential so that one can easily get loans or access to credit limits easily at competitive rates of interest whenever the need arises. When a person has a good credit score – lending institutions are willing to give loans without hassle and at cheaper rates.
There are 4 credit bureaus in India – TransUnion CIBIL, Equifax, Experian and CRIF Highmark.
CIBIL is a comprehensive credit bureau which was established in 2000 with a license to operate in 2010. CIBIL covers the analysis for individuals as well as organisations. It gives a credit score rating that varies between 300 to 850 – where 720 and above is an excellent score. For companies and other entities it gives a score called PERFORM score.
Equifax started off as a credit giving company in 1899 and in 2010 became a licensed credit rating agency. The credit score rating from Equifax lies between 1 to 999. Equifax also provides risk scores and portfolio scores in addition to credit scores for individuals. For companies they also provide credit fraud reports, portfolio management, risk management reports, industry diagnosis, and other reports may be obtained.
Experian is a licensed credit rating agency since 2010 in India. It was established in 2006 and it conducts analysis of credit reports on individuals and companies. The reports take about 20 days but are not very expensive. The credit scores rating range from 300 to 900.
CRIF High Mark was established in 2007 and obtained a license in 2010. The distinguishing factor of this is that the CRIF High Mark is the only one approved to operate in India by the Reserve Bank of India. CRIF conducts credit rating analysis for individuals and corporates. The credit score rating falls between 300-850.
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