How Do Credit Bureaus Get My Information?

For this week, we get into the nitty gritties of understanding how a Credit Bureau works and why you should be trusting only RBI approved bureaus that play a crucial part in generating your credit score.

Credit Bureaus or Credit Information Companies (CICs) are RBI regulated institutions that help determine your creditworthiness. To be precise, Credit Bureaus are institutions that collect information about your loans and credit cards, and create credit reports that help in generating your credit score. To help put your mind at ease, let’s simplify the entire process of how credit bureaus work to make your credit report.

Credit Bureaus, what do they do?
Credit Bureaus are known as Credit Information Companies (CICs) in India. CICs are licensed by the central bank (RBI) since they are a fundamental part of the financial ecosystem. In India, there are four credit information companies – one such is CRIF High Mark. The role of a Credit Bureau is to gather loan account information from various creditors and provide it back in the form of credit report to similar creditors. The vision behind creating such centralized bureaus was to improve the functionality and stability of the Indian financial system by containing non-performing assets (NPAs) and improving credit grantors’ portfolio quality.

The credit bureau collect repayment information of all loans and credit cards of an individual or a business on a periodic basis from all type of lending institutions across India, so as to create an accurate representation of one’s credit history. The data CICs gather is merged across all loans that an individual or business across multiple lenders under one credit report and a credit score is then generated that reflects the data in that credit report. The more negative information you have on your report- like missed payments, debts, etc.- the lower will be your score. This score is then used for various purposes like granting a loan or credit card or make more loan offers.

Creditors, who are they?
Creditors are none other than all lending institutions in India such as Public Sector Banks (SBI, PNB etc), Private Banks (ICICI Bank, HDFC Bank etc), Foreign Banks (Citibank, HSBC etc), Co-operative Banks (Saraswat Bank, TJSB etc), Regional Banks, NBFCs (Bajaj Finance, Tata Capital, CapitalFirst etc), Housing Finance Companies (DHFL, HDFC Ltd) and MFIs (Satin, Arohan etc). RBI mandates all such lending institutions to share data of all the existing loans and credit cards of individuals and businesses with each credit bureau at least once every month. This data also includes personal information about the borrower, details of loan availed (type of loan, sanctioned amount, when was it taken, etc.) and the current position of the loan like its outstanding amount, overdue amount, when was the last payment done and many more details. The data is shared in a standardized format overseen by the RBI.

Credit Reports, what’s in it?
A credit report is an aggregation of all your credit history. It includes information about your credit accounts such as the type of account, the date it was opened, your credit limit or loan amount, your account balance, and payment history as well as any collections that are in your name. Your entire credit history is a record of your borrowing and repayment activity on credit and loan accounts.

Credit Reports, what role does it play?
A Credit report determines your credibility or creditworthiness, which means whether to give you loan or not- for mortgage or automobile or education or for just about anything; interest rates to be levied or credit limit to be allowed on a credit card sanctioned to you; and in cases, employers too can check as part of your application process for a job. In some countries, landlords check whether to rent out their property to you or not. So, theoretically speaking, credit report does affect your life in many ways and more importantly your decisions or desires in life to scale up and grow.

A Credit Bureau is thus a central information platform necessary to create a credit report that may reflect directly on your credit management. So, whether you are financially savvy or not, whether you are looking for loans or not, try keeping your score higher by maintaining good habits regarding your finances and keep checking your credit score at least twice a year from RBI approved credit bureaus, such as CRIF.

How Often Should I Check My Credit Score? – What’s The Myth? What’s The Truth?

Credit Score is one of the most important factors of your financial credibility and often people are confused about various things related to it. ‘How to check score?’ ‘When to Check Score?’ ‘How many times should you check it in a year?’ are some of the most commonly asked questions. It is important to know your answers, know the truths and myths behind them.

Firstly, answering the most frequently asked question, ‘How often should I check my credit score?’ The answer is you can check it however often you wish to. It is a common myth that checking your own credit score frequently has a negative impact on your score. There is some negative impact on your credit score if you apply for new loan or card very often or with many banks at the same time, as the banks would make as many ‘credit inquiries’ with the credit bureau. With high number or frequent ‘credit inquiries’, the credit bureau believes that you are desperate to get a fresh loan, therefore, considers that behavior negative.

Having said this, it is not necessary to check your credit score all the time or every day. Let’s guide you through the ‘how’ and ‘when’ to help you determine the right time to check your credit score.

Who Should Check Credit Score?

A credit report is generated only when you own a credit card or have a loan taken in your name. Credit scores are calculated from the credit report. Therefore, whoever meets the above criteria is likely to have a credit score. All such people should certainly and regularly check their credit report and credit score.

What If You Never Had a Credit Card or Loan Before? When you have not borrowed in the past or have never had a Credit Card or a loan, there will be no updates about you with the credit bureau, who mark such cases as NH or ‘No History’. Due to a lack of details, the credit bureau will be unable to comment on your payment behavior. In such cases, we advise to start building your credit score and checking it once a year. For more details , you could visit our blog What do banks see when they look at your credit report?

When Should You Check Your Credit Score?

When to check credit score completely depends on your comfort level and your credit activity. Checking your credit score once every quarter is perfect but people often check it twice a year or even monthly at times. The credit score should be checked and the credit report reviewed at least once in a year that’s a minimum!

It is important to remember that checking your credit score on your own does not impact the credit score at all, even if done very often. In fact, keeping a track of your credit score frequently makes sure that you are aware of your creditworthiness, you are taking informed decisions about your credit, and you have a clear picture about when and how to maintain your credit score. A quick reminder, avoid focusing too much on the day-to-day changes and try to identify the overall trend in your credit score. Below are some reasons why you might want to check your credit score or credit report:

1. Before applying for a new credit card or loan such as housing loan, auto loan to avoid any surprises
2. While building or improving your credit history to keep a track of your credit scores.
3. After settling off or closing a loan to know if the updates were made

When Not to Check Credit Score?

There is no such time when to avoid the credit score. The importance of credit score has been talked about in every other financial article. It has to be a part of your yearly routine at least to stay updated and informed.

Even when you have good credit score, it is important to keep an eye on any drops in score or inaccurate information on your credit report and to ensure that it is maintained above acceptable thresholds. If it is on the lower end, make sure you change your habits and take conscious steps to bring it up. Also, minor changes on your credit report or credit score should not be a cause of concern as these are expected to happen. So checking credit score daily can be avoided.

How to Check Your Credit Score?

There are various online websites which give you credit score, but the source of such credit scores would be one of the four RBI regulated credit bureaus such as CRIF. When it comes to finances, you ought to trust the expert and give importance to data security.

One of the trusted way to do so is check it from CRIF, a RBI regulated credit bureau. You are entitled to check a credit score and credit report FREE once in a calendar year from CRIF. Checking your credit score is easy three step process – fill your personal details, confirm your identity and download the https://blog.crifhighmark.com/wp-admin/tools.phpreport.

There is no right time or right day to start keeping a track on your financial credibility. Informed or Unaware, choose wisely

Why banks use credit info when I have my savings account with them?

Twenty20 has always been pitched as the cricket format with the most crossover appeal. The success of this year’s IPL is living proof. Rakesh was indeed surprised on the performances by IPL Teams.

Yes, indeed. Anyways, even when our work makes us so busy in our own lives, these matches have just been giving us a chance to meet.

Oh, certainly. Anyways, you remember, I had applied for a housing loan. Even while the bank finally sanctioned my loan, it took them a century to process for it. They were saying that my credit history was now much old for them to process the loan faster. I don’t know why banks emphasize so much on historical data?” Rakesh was back on his learning curve.

Banks resort to credit reports for checking the past repayment history of the borrower. Credit reports show the information about existing loans and also the status of the outstanding amounts and in case any of such amounts are under default. This helps the banks to estimate the risk of default for the borrowers.” As always, Aditya was there for Rakesh’s questions.

Well, I can understand such an analysis for someone who is not an existing customer of the bank. I fail to understand why banks need to use credit information separately when I already have my savings account with them.” Rakesh shared a genuine concern.

That is indeed a valid point. However, even while you may hold a Savings Account with a handsome amount lying in it, your financial management and repaying habits are not clearly reflected through the pattern of transactions in the Savings Account. Banks need to factor in that how much of the regular monthly income is already committed for monthly EMIs, which they can estimate only once they have your complete credit data. Besides, in case you are utilizing the credit limits to the extent possible and paying only the minimum amounts due, that indicates your high reliance on the debt.All this information can only be fetched through credit reports and summarily reflected in the credit score. That is why banks give so much importance to the credit report data.” Aditya also made a good point in a bid to clear the confusion of Rakesh.

Credit reports certainly show off some valuable data for the banks. One should always be careful in dealing with the debts owed.” Rakesh was slowly getting a good hold over the subject.

“Just remember not to default on your EMIs and utilize debts only for productive uses.” Aditya closed the conversation on a crisp note.

Rakesh and Aditya were both smiling.

How do Credit Bureaus Work?

Rajesh and Aditya were again together, having some good time watching the IPL Trophy 2018. However, amidst the cricket talks, the conversation again shifted towards the credit score. Rajesh was indeed happy knowing the procedure to get the credit score in the last conversation. However, he could remember that the bank wasn’t able to find the score from one credit bureau but then finally caught hold of his credit score from another credit bureau. He was just wondering “How” and he instantly knew who will clear his doubts as always.

Every lender shares loan data with all credit bureaus generally within the first two weeks of each month. Each credit bureau takes its own time processing that information and refreshing it on your credit report and score. Further, it may be possible that the same set of information is processed in a different manner by different credit bureaus. So, it might be possible that one credit bureau missed your information or left it on grounds of being inadequate while the other credit bureau creates your credit history based on that information itself. Also how a credit bureaus searches your data in its own database depends on its own logic – remember Google vs Bing! These are some of the reasons why your record could be missing with one credit bureau but found in another.” Aditya was indeed happy to be Rajesh’s guide.

Oh, that’s quite complex. But why do banks share my data with credit bureaus? Is my data all secure? It seems like anyone can access my personal data.” As always, Rajesh was still far from being convinced.

RBI mandates banks to share this data with all 4 credit bureaus in India. The data collected and stored by the credit bureaus is kept under many layers of security. Your personal data and is accessible only to you or to a lender whenever you apply for a new loan.” Aditya was leaving no stone unturned to convince Rajesh.

Oh, that is good. It is always good to learn something new from you. The match wasn’t good, but this learning will indeed be helpful. I have much more to learn from you, but next time” Rajesh seemed happy now, and needless to say, convinced too.

“Yeah. Let’s keep something for next time. Now, it’s time to enjoy some tea now.

Aditya moved towards the kitchen to get some biscuits for the tea. Rajesh and Aditya were both smiling.

Know your Credit Score

IPL Trophy has gripped the country since the last month, more so since the game involves competing teams inclusive of international talent. Rajesh, an IT professional and Aditya, a Chartered Accountant, were also spending the day together watching the IPL Trophy. Even while they were put off by a dismal performance by their favorite team in that match, Rajesh started discussing the recent query he faced from ABC Bank after he applied for a housing loan.

Rajesh was visibly upset for his favorite team’s loss and also for the delay he was facing for his housing loan sanction.

“Aditya, amidst low score today by your favorite team, please tell me what is this credit score? My bank is unable to fetch my credit score. As such, my housing loan application is getting delayed as the bank wishes to gather more documents in support of my application.”

Credit Score is a score calculated on the basis of your repayment habits like paying installments on time, rolling over your credit card bills etc. For a lender, your credit score is your first impression, as your bank forms your opinion as a borrower on the basis of this score only. If one doesn’t have a credit card or any existing loan, the credit report will not have any data and as such, this person would not have any credit score.” Aditya, being a professional in the field and also his best friend was there to his rescue as always. Click here for more details on What do banks see when they look at your credit report?

I think I need to clear my basics. I am totally clueless about the subject. What’s the range for this score and what does it denote?” Rajesh seemed interested to know more.

Credit score is calculated once you have an credit history of more than 6 months. CRIF score ranges from 300 to 900, higher credit score reflecting better credit habits. So, an individual with a credit score 800 will get a loan more easily than one with a credit score of 650. . Aditya was happy to educate Rajesh about an unknown subject.

“So, what is it which I can say to be a good score? Or it’s all relative to credit scores of other individuals?” Rajesh seemed confused now.

“A credit score above 700 is what banks consider as good score. However, a lower score does not make you ineligible for a loan. Banks are just more cautiously sanctioning a loan then and hence, may ask for additional documents to process your application.” Aditya cleared his confusion happily.

“I am so relieved now. No wonder, I trust you for all my financial troubles. Now I know one more score apart from the cricket scores, the credit score. But I do need to know how can I check my score?” Rajesh was much more excited now.