Source : By R Srividhya :DigitalFC:Sep 11 2011
A poor record can mar your chances of obtaining a loan
One of the important signs of a mature financial market is the presence of active credit information services bureaus that provide vital information on credit behaviour of consumers to banks and financial institutions to help them take a decision on credit provision.
The sign that India has arrived as an important financial services market is evident from the huge plans that the three major global credit information companies in the world, Experian, TransUnion and Equifax, have for the Indian market.
What does a credit bureau do?
The sign that India has arrived as an important financial services market is evident from the huge plans that the three major global credit information companies in the world, Experian, TransUnion and Equifax, have for the Indian market.
What does a credit bureau do?
A credit information bureau works by collecting data from various banks and financial institutions on consumer and commercial borrowers. The data collected is shared with member institutions as and when they need information on the previous credit history of the borrower or for designing new products or to study consumer behaviour pattern.
Apart from banks and non-banking financial companies (NBFCs), credit bureaus also collect and share information with housing finance companies, credit card companies and state financial corporations. Information like PAN number, permanent address and phone number are usually used to identify a customer and link it across to his different credit transactions
Credit bureaus in India: The oldest and largest credit bureau in India is Cibil, which has credit information from various banks and financial institutions right from the year 2000. The leading credit information bureau, TransUnion has a 20 per cent stake in Cibil, which launched operations in 2004.
Apart from banks and non-banking financial companies (NBFCs), credit bureaus also collect and share information with housing finance companies, credit card companies and state financial corporations. Information like PAN number, permanent address and phone number are usually used to identify a customer and link it across to his different credit transactions
Credit bureaus in India: The oldest and largest credit bureau in India is Cibil, which has credit information from various banks and financial institutions right from the year 2000. The leading credit information bureau, TransUnion has a 20 per cent stake in Cibil, which launched operations in 2004.
Cibil, which has a data-sharing agreement with more than 600 banks and financial institutions, is the only one to provide a consumer credit score, apart from providing a detailed consumer credit report.
Experian, which entered India just last year, provides basic credit information services, mostly for corporate customers. “India is an important strategic market for us. We have plans of getting into consumer credit information area whenever the time is more appropriate,” says Mohan Jayaraman, who recently took over as managing director of Experian India.
The other leading global credit information bureau, Highmark Credit Information Services, is present in India through its credit bureau for the micro-finance industry.
Equifax Credit Information Services, which is a joint venture between Equifax and six leading financial institutions, also provides credit risk and analytics services.
How is credit information used?
Experian, which entered India just last year, provides basic credit information services, mostly for corporate customers. “India is an important strategic market for us. We have plans of getting into consumer credit information area whenever the time is more appropriate,” says Mohan Jayaraman, who recently took over as managing director of Experian India.
The other leading global credit information bureau, Highmark Credit Information Services, is present in India through its credit bureau for the micro-finance industry.
Equifax Credit Information Services, which is a joint venture between Equifax and six leading financial institutions, also provides credit risk and analytics services.
How is credit information used?
For retails customers, the credit scores and reports are useful in bargaining for better interest rates when seeking a new loan. By paying a small sum, retail customers can avail their credit report and credit scores from the credit information agency.
Banks also use the credit information report to check information like the credit worthiness of the customer. “Our Cibil credit scores are usually in the range of 300-900, with the lowest indicating the high risk involved in lending to the customer.
A person with a credit score of 800-850 is considered a good customer who is likely to repay the loans on time,” points out Arun Thukral, managing director, Cibil.
Credit bureaus in developed markets: In developed markets like the US and in parts of Europe, credit bureaus provide more value-added services such as identity theft insurance, security freeze, which prevents one’s credit report being reported to third parties, except those permitted by law and market analytics that helps study consumer credit pattern.
Credit bureaus in developed markets: In developed markets like the US and in parts of Europe, credit bureaus provide more value-added services such as identity theft insurance, security freeze, which prevents one’s credit report being reported to third parties, except those permitted by law and market analytics that helps study consumer credit pattern.
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