How conscious are Indians about their credit scores?
The usage of the credit bureau in the UK is 10 times more than that in India. Consumers there have a much better access to their credit scores but that has taken a lot of time, almost 30 years. That’s not the case with India. While banks here are increasingly becoming aware of credit scores, customer awareness is still low.
How frequently should one track his/her credit score?
Normally the best time to access and assess credit score is when you plan to take more credit. It will help you check the status of your finances and ensure that they are reported correctly. This is not something you need to do everyday or every month or even every year. How regularly you need to check it depends on how credit active you are. Basically you should check your credit score and then ensure you don’t default so that it remains intact.
Despite a good credit history if a consumer’s credit ranking is negative, what could be the reasons?
For instance, if your credit card has additional charges which you refuse to pay over and above your usage charges, then it will show as an outstanding balance with the credit card provider. So when you settle and close your accounts, it is important to get a no dues certificate from the lender. However if such issues are reported to us by either party, we will work in sync with both to get the errors rectified.
How can credit scores be improved?
The best way is to first acknowledge it. The problem is not going to go away if you ignore it. The first step is to speak to your lender and validate that the information is correct. The only way to improve your rating is to begin paying all of your credit on time. Also, recent records carry a lot more weight than historical data. So if, say, over the past three-four years you have regularized repayments then it works in your favour.
When you seek credit for the first time, how do you prove your repayment capacity?
Unlike other markets, credit bureaus are not allowed to use data from telecom operators in India. The fact that you pay your monthly mobile bill on time is a good indication of how you would repay other credit. But in India you need to prove that you can meet the standard repayment characteristics of any lender. It would help to have an account with the lender. If you can use a credit card responsibly, then timely payment of credit card bills also works in your favour.
What does competition among credit bureaus mean for borrowers? What if different agencies have different scores for them?
Competition in any industry always benefits consumers. With more operators, the quality of data supplied will improve. Consumers will also have the right to see their files and any discrepancy can be quickly corrected.
As for different scores, it will depend on which lender is using data from which bureau. But the data supplied by the lenders to credit bureaus is likely to be uniform. So the only reason for different scores across bureaus could be the speed at which data is supplied and updated.
Phil Nolan managing director, Experian Credit Information Co. of India Pvt. Ltd