The credit cycle of 2007-08 resulted in significant losses for many banks in the consumer lending space, especially in unsecured lending products. Post the crisis, banks have become more stringent in their lending policies. With the Reserve Bank of India granting licences to new credit information companies, banks now have the choice of using multiple bureaus and new credit risk products. A credit report, which is a compilation and analysis of the borrowing history of an individual, is one such key product.
Banks and financial institutions refer to credit reports before they decide to lend. It, therefore, becomes imperative that individuals’ credit report accurately reflects all their loans and cards and their repayment history. All information contained in a credit report is submitted by financial institutions that are members of the credit bureau and any changes can be made only after it has been certified by the concerned financial institution.
Individuals who currently have an outstanding loan/debt in any form or who are looking to borrow should ideally get their credit report on a quarterly basis to ensure that the details reported therein are accurate. This translates to a cost of Rs500-600 per annum. There could be instances where some discrepancies can occur or the report may not be completely updated due to incorrect or delayed/non-submission of data by a financial institution.
In case the information is incorrect or the report is not updated, the borrower can approach the respective financial institution and the credit bureau to correct/update the report. The bureau and the financial institution should take appropriate steps to correct/update the information within 30 days of being requested to do so. The escalation channel for non-action is the banking ombudsman or consumer forums.
The borrower has to submit the relevant identification (know-your-client) documents and fill up the dispute investigation form to authorize the dispute escalation. During the course of the dispute resolution period, the bureau will inform the individuals about the status.
Financial institutions that deny credit to a borrower on the basis of the credit report need to intimate the borrower within 30 days of such a decision. Upon request, they would also need to forward a copy of the credit report. Borrowers can study the report for any inaccuracies and get it corrected to improve their chances of getting a loan.
In case the credit bureau supplies wrong information and discovers it on its own later, it needs to intimate the financial institution or individual within seven days of finding the problem. The bureau must also take immediate steps to correct the same and forward to the concerned financial institution or individual within 30 days.
Consumers must be wary of providing copies of their identity documentation to external agencies. In India, it is very common for people to give copies of their driving licence/passport/voter identity card/permanent account number for obtaining various services. Such documents can be misused for obtaining a loan/credit card fraudulently. This could result in unwanted litigation and problems. One way of ensuring that your identity has not been stolen is to obtain a credit report at frequent intervals and ensuring that all loan outstanding reported therein are yours.
Individuals who ensure that their credit report is accurate stand a much better chance in ensuring that they get funds when they need and may also get the best rates on offer.
Samir Bhatia is managing director and CEO, Equifax Credit Information Services Pvt. Ltd.
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