Thursday, December 13, 2007

My credit score is being tracked !!!

I always knew that there exist credit bureaus in the developed countries which track the credit score of an individual or corporation. For example I once read some where that on the Amercian credit rating scale, a rating of less than 600 is sub-prime. I had this thing at the back of my mind since a long time, and today I just happened to come across the equivalent credit site for India.

Credit Information Bureau (India) Limited aims to (in their own words) "fulfill the need of credit granting institutions for comprehensive credit information by collecting, collating and disseminating credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members." The Members are institutions like banks, non-banking finance companies, Credit Card companies, Housing Finance companies amongst others. It started with the joint efforts of State Bank of India (SBI) and Housing Finance Development Corporation (HDFC), Dun and Bradstreet Information Services India and Trans Union International with a shareholding pattern of 40:40:10:10, although it now diversified amongst many more entities.

The interesting thing to note is that the bureau gives out information on the basis of reciprocity. Which essentially means that institutions which have made their complete data available to CIBIL are only eligible to receive the Credit Information Report (CIR). Additionally, if your lending institution gets a credit report on you, you can obtain a copy of the report for yourself.

So the very pertinent question that remains in this day and age of identity theft and no sanctity of private personal information is one of what is the nature of information that they collect and store about us. From the website,

The CIR includes the following information:

  • Basic borrower information like:
    1. Name
    2. Address

      In case of individuals:
    3. Identification numbers
    4. Passport ID
    5. Voters ID
    6. Date of birth

      In case of non-individuals
    7. D-U-N-S® Number
    8. Registration Number
    9. Legal Constitution
  • Records of all the credit facilities availed by the borrower
  • Past payment history
  • Amount overdue
  • Number of inquiries made on that borrower, by different Members
  • Suit-filed status.
Doesn't leave much to the imagination of the creditor, right?? Well there is an indicative list of what it does not hold also. Again, from their website:

The CIR does not contain:

  • Income / Revenue details
  • Amount(s) deposited with the bank
  • Details of borrowers' assets
  • Value of asset(s) mortgaged
  • Details of investment(s)
Some relief there! And the best point there is the amount(s) deposited with bank. It would take a finance whiz to figure out all the transactions that go on amongst us bachelors/bachelorette staying with flatmates and working with colleagues.

The question that still remains whether it is good to have an entity like this. I think it is very necessary for me. I am young and earning but at the same time I am responsible. Which means my past bank balance does not determine my credit quality. When I take a loan I am confident that I will be able to repay it. With an agency like this, it does not require lengthy explanations. The finance company would ask just to make sure I still maintain the same habits.

So when are you tracked into this database. Do you use a credit card?? Did you ever take a loan from a recognized financial institution, however itsy-bitsy it was?? Did you ever overdraw your bank account?? Well if you did do any of those things, you are already in this database. You can't go off this database. Which means you need to learn to live with this. Which leaves with the one choice that one faces with every new entity. Do you want to learn more about its functioning and make it your friend for an easier financial life or would you rather suspect its intentions at the very start and keep agonizing over it and blame it for your poor credit quality.

I think I will make it my associate for a lifetime. What do you think??
Post a Comment