Borrowers often find their home or auto loan applications rejected due to credit rating scores from the Credit Information Bureau of India, or Cibil. And sometimes, even though they may not have defaulted, it can be the outcome of a dispute with a bank.
With three more credit rating agencies - Experian Credit Information Company of India, Equifax Credit Information Services and Highmark Credit Rating - entering the market, the process may be speeded up.
Financial experts say an individual can expect faster dispute resolution, protection against identity theft, easy availability of credit reports and more individual-centric services from the new players. This is likely to help a borrower improve his\her score, and even, resolve any dispute with a bank before applying for a loan.
Some innovative moves are already underway. For instance, Experian Credit Information Company has made the process to make payment for getting a credit information report (CIR) easier.
A customer can pay Rs 138 by demand draft, or through internet banking or by visiting a National Electronic Funds Transfer-enabled branch. The rest of the procedure is the same as in Cibil. The person needs to fill a form, attach an identity proof and mail it to the bureau.
Earlier, Cibil used to accept payment only via a demand draft. The bureau, too, has started offering a similar payment option. The only difference is that the CIR from Cibil costs Rs 4 more.
While this is just one small change that has taken place, experts say there will be more when the three bureaus become fully functional.
More comprehensive data
To stand out, credit bureaus are already trying to establish their niche. While some are trying to be strong in a particular region, others are establishing themselves as players with better data on non-banking financial companies (NBFCs) and co-operative banks.
"Many banks had stopped lending or issuing credit cards if the customer's name did not reflect in CIR. These included customers that banked with NBFCs and co-operative banks, who were not covered," says Samir Bhatia, managing director and CEO, Equifax Credit Information Services.
With availability of this information, banks will have more comprehensive data to understand the customer. As a result, more customers will be able to get loans and credit cards from banks. In addition, risk assessment will be done with a much-broader set of data.
Quick dispute resolution
Loans often get rejected if CIR shows the borrower is in a dispute with a bank. With more players in the fray, if a bank has access to data from more than one player, and one data shows better credit rating than the other, the individual can pinpoint the dispute immediately and resolve it.
Moreover, even before opting for a loan, an individual can get the credit score and resolve the dispute.
Though the Reserve Bank of India mandates banks to upload the revised data within a month's time, with more players, data could be updated much faster. "Credit bureaus will take up these disputes on behalf of consumers. However, the bureau, if intimated about the resolution of such disputes by the consumers, will take up the issue with the bank and urge the bank to send the update before the periodic update," says Phil Nolan, managing director, Experian Credit Information Company of India.
Identity theft protection
A standard service abroad, credit information bureaus are planning to offer this service to customers. Here's how it will work: The customer will be alerted through an email or an sms every time a bank/financial institution views his CIR. In case the customer has not applied for a loan, he\she can call up the contact centre of the bureau to get details. This will help him\her to know if someone is accessing his data with a fraudulent motive.