General article about credit bureaus

1. Credit Bureaus:
A vehicle loan or housing loan if CIBIL score is 300 then you can kiss it goodbye
since your banker will rule out your loan application. Credit bureaus area boon to
some individuals and bane to the other few .Banks, companies, other lending
institutions depend on the credit bureaus when it comes to loan processing or nay
other requests. It acts like a lifesaver from dystopia
What is a credit Bureau?
Text bookdefinition of credit bureau is a data collection agencythat gathers
information from creditors which can be used by consumer lending institutions.
Lending money is no easy thing especially with the increasing number of bad debts
and NPA’S
In the current economy mergers of bank is slowing down the growth and the base
for that decision is mainly because of NPA’s. Credit agencies aim to mitigate the
risk involved in lending business.
How credit bureaus work?
Based on your credit history. While applying for a credit card or loan details of the
loan applicants are stored in the database and applicants and screened. After
screening the credit score of either an individual or institution is rolled out. In depth
credit report is prepared and it is presented to lenders.it gives a comprehensive
view of the credit worthiness of the loan applicant.
Collection of DATA:
Credit bureaus collect data of borrowers for credit scores they collect various
information like credit history of a customer:
1. 1.First time opening of credit card
2. 2.repaymnet history
3. Outstanding debts
4. Any bankruptcies, foreclosures etc
These type of information is collected by credit rating agencies to arrive at a credit
score that is forwarded to bankers, lending institutions, insurance companies
.Credit bureaus are governed by FCRA(Fair credit Reporting act) that says how credit
bureaus must function .If there are any errors in credit reports then borrowers can
raise grievances and disputes as per this act. These bureaus only provide
information a and final decision of whether a particular borrower is credit worthyor

2. not or accepting their loan application lies with the loan officer who makes the final
decision of nay bank or lending institution.
MAJOR CREDIT BUREAUS:
The following are the major six credit bureaus approved by SEBI
 TransUnion Credit Information Bureau (India) Limited (or CIBIL)
 Credit Rating Information Services of India Limited (CRISIL)
 Equifax
 ICRA (formerly known as Investment Information and Credit Rating
Agency of India Limited)
 CRIF High Mark
 Experian
Pros Of Credit Bureaus:
To lenders:
Primarily credit scores act like a wall for lenders. It helps them to avoid the risk of
bad debts .If an applicant has bad credit score then automatically loan request gets
rejected.it helps financial institutions to make informed credit decisions.
No collateral credit:
Borrowers with good credit scores can gets loans without any collateral. First time
loan applicants can become credit worthy customers based on credit scores. People
who have fail proof credit history can be benefitted since they can get loans easily
without much hassle.
On time payment:
Credit score acts a check on borrowers and it pushes them to pay off their dues on
time without defaulting .If they mess up their credit score then they can kiss their
future demands for funds goodbye hence to avoid bad scores on time payment of
dues is encouraged
Cost reduction:
Assessing a borrower’s status led to too much expenses and hassle previously now
because of credit bureaus it is considerably reduced. Credit reports reduce
uncertainty when comprehensive credit history of customers is handed over to
lenders and lowers credit prices.

3. Risk management:
Sharing of information among lenders reduces NPA’s. It helps a loan officer to
select low risk borrowers rather than high risk defaulters.
Reducing Moral hazard becomes the main aim of borrowers since credit information
is immediately circulated to potential lenders hence they may avoid default of loans
.Credit bureaus have evolved over the decades and help institutions from many
aspects.
Cons of Credit bureaus:
Inaccurate information:
Credit bureaus may have inaccurate information and inadvertently spoil the
credit score of a loan applicant. A study by PIRG revealed that 79% of
mistakes can be found in 200 credit reports. Credit reporting agencies have
vast data collected by them and there is room for huge error.
Identity theft:
Identity theft is a harsh reality .A person pretending to be another person
may have drawn loans with the victim’s details like account number, address,
name etc. Credit reports must be demanded by individuals and institutions
regularly to keep a check on any instances that may make their credit scores
to go awry.
Privacy policy:
Credit rating agencies must definitely have a fail proof firewall and must
make sure the database with them is not hacked or used inappropriately.
Credit rating agencies must perform credit monitoring to avoid identity theft
and must protect the data of borrowers.
Hence in conclusion credit bureaus with their credit histories have developed
the economy as a whole by improving competition decreasing credit costs,
promoting consumer credit and proving leverage to new borrowers over
established ones.