What are credit information companies and why do they matter?

Credit Information Companies (CICs) are an important part of the current lending landscape in India. They collect, analyse and disseminate credit information that lenders use for underwriting. They play a role in the lives of individuals, businesses and the wider credit industry.

What are credit information companies?

CICs are also known as credit bureaus, they are licensed by the Reserve Bank of India. In India, the big four consumer CICs are Equifax, CRIF High Mark, Experian and TransUnion CIBIL. These businesses collect detailed information regarding financial and repayment behaviour from insurance companies, banks, NBFCs, and telecom companies.

CICs also gather similar information on businesses. Based on this information, individuals get credit information reports or credit scores while businesses get company credit reports and ranks.

What are the benefits of CICs?

• Consistency and standardisation among lending institutions.
• Lower interest rates for people with good credit score.
• Better financial inclusion through profiling the credit behaviour of under banked groups.
• Noted accountability and healthy competition in lending decisions.

How CICs impact loan seekers and borrowers?

1. Loan approvals: CICs provide lenders with complete reports and credit ratings to help the lender determine a borrower’s qualification. Credit scores are factored into not only the approval decision but loan term and loan interest rate.

2. Credit limits: Financial institutions use CIC’s reporting for a borrower’s credit utilisation ratio for consideration of how much more credit the borrower can take on.

3. Default risk assessment: CICs quantify delinquencies and debt repayment behaviour. Lenders will consider a borrower’s history of EMI bounces, frequency of late payments, and any prior defaults to quantify their risk of issuing any new credit.

4. Dispute process: If a mistake occurs on your credit report, CICs provide a formal dispute process to review an error. Borrowers can submit requests to correct errors and provide all evidence through an online issue resolution process.

In conclusion, credit information companies are the basis of the credit ecosystem in India, and serve a much greater role than simply record keepers. With regard to providing borrowers with access to, and, control of their credit profile; CICs represent a lasting and transformative role in ensuring regulatory compliance, and enabling improved credit discipline.

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Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.