Financial Management, General Finance

Credit Scores – Part 1: The What, Who and When

Introduction

“Sorry, we won’t be able to process your loan application because your credit score is too low.” As a person who has availed loans before, I can testify to how much this single statement can hurt. Especially when there is a pressing need of funds, and you know that the low credit scores are mostly your own folly. Banks and non-banking financial institutions do not take any pleasure in harming your credit score on purpose. Delays in payments, improper follow-up, willful defaults are just some of the culprits that lead to a bad credit score and report.

We’ll help you know what your credit report is, how to read and understand it and some tips on improving your credit score faster.

 

Credit Bureau, Credit Scores and Credit Reports at a Glance

I’m sure most of you would be familiar with the term ‘CIBIL Score’. CIBIL is one of the four institutions in India that collect and compile credit information of individuals and business entities from across the nation. Along with Credit Information Bureau of India Limited (CIBIL), Equifax, Experian and CRIF High Mark are the Credit Information Companies that deal with credit data in India. CIBIL is by far the oldest and the most popular, having its origins in the year 2000. Experian has been in existence since 2006 and achieved a license of operation in 2010. Highmark and Equifax also received operating licenses in 2010.

Lending, be it for personal, business or residential purposes, is always laden with risk. Credit Information Companies provide the data to lenders that helps them take a rather calculated risk instead of a blind one. Based on how a business has been performing financially or how a person’s bank records are, credit scores are given by these agencies within a range specific to each of them. A small comparative chart of the same is shown below –

 

CIBIL

Equifax

Experian

CRIF High Mark

Score Range

300 to 900.
900 the best
300 the worst

1 to 999.
999 the best
1 the worst

300 to 900.
900 the best
300 the worst

300 to 850.
850 the best
300 the worst

Good Credit Score Threshold

700 and above

650 and above

700 and above

720 and above

Poor Credit Score Threshold

600 and below

500 and below

600 and below

640 and below

 

The good and bad thresholds are the trends that are followed by most banks and/or NBFCs when deciding to issue loans or credit cards. There might be institutions who can define their own set of credit scores that they consider good or bad. This is just a general idea. You might notice there are gaps of quite some values in between the good and bad score thresholds. These are the popular ‘gray’ areas.

If your credit score falls in these gray areas, it is mostly up to the lender whether to approve or reject a loan or credit card. There are some people for whom the CIBIL TransUnion score would be in negative or in single units. In such cases, mostly the person has never had any loan or credit facility ever. For them, most lenders do quite a few background checks, but if everything is fine, loans and credit card approvals are not far away.

Credit scores are just a summary whereas credit reports are the more important reports that you should be keeping an eye out for. These reports deal with extensive information and need to be read carefully. Every loan you have ever availed, and every credit card you have used is listed in here, along with the payment delays, delinquency status and status of the credit instrument. Sometimes, there might be inconsistencies in these records and based on the same, you can even file a dispute with the respective credit bureau. Based on the validity of the dispute claim, they will get in touch with your lender and sort out the problems in your report.

Each bureau takes a certain amount of time to generate your report. Every report generated comes with an associated amount of fees. The following table gives a general overview of the rates and time taken by these bureaus for generating credit reports. Additional services offered by the bureaus is also mentioned in the table –

 

CIBIL

Equifax

Experian

CRIF High Mark

Services

For Individuals –

CIBIL TransUnion Score

Credit Information Report

Market Insights

For Companies –

Portfolio Review Reports

CIBIL Company Credit Information Report

CIBIL Bureau Analyzer

Extra services –

Portfolio Management

Fraud Prevention

Customer Acquisition

Custom Solutions

For Individuals –

Equifax Credit Information Report

Equifax Alerts

Equifax Portfolio Review

Equifax Risk Score

For Companies –

Credit Risk and Fraud Management

Portfolio Management

Industry Diagnostics

 

For Individuals –

Experian Credit Information Report

For Companies –

Customer Acquisition

Collection and Money Recovery

Customer Management

Data and Analytics

Customer Targeting and Engagement

 

For Individuals –

CRIF High Mark Credit Report

Portfolio Management

Alerts

Geo Analytics Consulting

For Companies –

CRIF High Mark Credit Report

PERFORM Score

Portfolio Management

Extra services –

Verification

Data Quality Management

Credit Assist

ETA for Credit Report

5 minutes for CIR

7 days for Detailed Report

10 days

5 minutes for paid CIR

3 days for free CIR

5 minutes for paid CIR

3 days for free CIR

Fees

Free once a year INR 500
INR 800
INR 1200
based on subscription

INR 400

Free

INR 399 for detailed report instantly

Free

INR 399 for detailed report instantly

 

When to Use What

Normally, getting a credit report and score from any one bureau should work for any individual or company. If you are running a small business, it is advisable to get separate reports for yourself and your business from at least two bureaus every 6 months. These reports will also have varying credit scores depending upon the usage and repayment of your loans/credit cards and EMIs/bills respectively.

That way, you can easily keep track of what problem areas are in the reports that can be fixed. Often, sometimes rectifying incorrect data in the reported information can go a long way in increasing credit scores. In all the bureaus, you will need at least one government-issued identity proof and acceptable address proof to raise a dispute. If you have multiple credit cards or multiple loan accounts, it can be a bit tough to keep up with the process of CRIF High Mark. Experian and CIBIL do not require as many multiple checks to show you the credit report and the corresponding credit scores.

With a basic overview of credit scores here, we are presenting you some links where you can access an annual free credit report from some of these bureaus –

  1. Free CIBIL Report (Once a year) – https://www.cibil.com/freecibilscore
  2. Paid Equifax Score and Credit Report – http://www.equifax.co.in/consumer/forms/credit_report/en_in
  3. Free Experian Report – http://www.experian.in/consumer/experian-free-credit-report.html
  4. CRIF High Mark Report – https://cir.crifhighmark.com/Inquiry/B2C/B2CommercialPortal.action

Did you find something in your reports that you don’t remember? While you can raise a dispute any time, it is better to be safe in the future. Perfios is a money manager that can track any financial account for you and is free for individual users and can include small businessmen effectively. Do check it out!

If there’s something in your credit report that you don’t quite understand, read our next article to get an insight into how to read the more complex reports from bureaus.

Author


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Kaushik Mohanty

Kaushik has been dealing with stocks, debentures, government bonds and mutual funds for over 5 years and has a keen interest in business finance. He is an MBA in Marketing and International Business and loves writing.