After the Reserve bank of India (RBI) made it mandatory for credit bureaus to offer one free credit report to those interested in getting one, the bureaus rolled out the offering starting 1 January 2017. As reported earlier in Mint, here (bit.ly/2ko4h37) and here (bit.ly/2ouwyWz), some offerings began with difficult and complex processes, which were later made simpler by all the bureaus.
Apart from bureaus, online financial marketplaces are also offering free credit scores and reports. “A fintech company, with authorization from its consumers, can access their credit reports and scores from a credit bureau for a price. It may, in turn, choose to offer this report or score to the consumer for free or as part of its services," said Manu Sehgal, business development leader, emerging markets, Equifax India.
These reports are not counted against the free reports you can get from credit bureaus directly. “This model of free credit reports is distinct from the RBI-mandated free credit report, which the bureaus provide once a year," Sehgal said.
On the four fintech platforms we went to, it took no more than a few minutes to log on, authorise the fintech to access our credit report, and get it on the screen or in email. And it was also simpler to get a report here than from a bureau’s website.
On Bankbazaar, we got the report on its website and in email. Paisabazaar displays the report on its website. Both sites provided reports from Experian Credit Information Co. of India Pvt. Ltd. Paisabazaar also provides a free monthly update on your report. CreditMantri shows you the credit score on its website, but you have to pay Rs199 plus taxes to get the full report. The score and report are from Equifax Credit Information Services Pvt. Ltd and you can get them for free on Equifax’s website or mobile app. IndiaLends displays the score, and an analysis from CRIF Highmark on its website.
When you get a free report from a fintech, it does not count towards your quota of free reports from the credit bureaus.
The details of agreements between credit bureaus and fintech companies is not known. But it seems likely that the credit bureaus are using these to broaden their consumer base. Mohan Jayaraman, managing director at Experian said that the partnership with fintech firms will improve awareness about credit reports, and also help them to reach a larger consumer base. “From a consumer perspective, it helps consumers gain access to their credit reports as well as identify suitable opportunities that will help them in getting access to credit," he said.
Fintech companies are also looking to leverage the financial information, and credit history, that you share with them. “People look for unsecured lending products on our platform. A bureau check on that individual happens anyway," said Naveen Kukreja, co-founder and chief executive officer, Paisabazaar.com. Also, a better-informed customer is more likely to make better financial decisions. For the fintech too: “It becomes easier for us to give the right product to the customer," Kukreja said, and added, “We make revenue only when customer gets a loan."
Why is it easier with fintechs? Kukreja said that the critical difference is that credit bureaus are traditionally B2B (business to business) companies while the fintech platforms are B2C (business to consumer). “Their clients are banks and not consumers; so it is not surprising that they do not have as smooth a process as we do... When we started giving out credit score and reports, even we took one day," he said.
Nothing is free. And in this case, you give the fintech platform your usual Know Your Customer (KYC) details like name, date of birth, address and Permanent Account Number; as well as details like employment status, name of employer and monthly salary. Through credit bureaus, they also have access to your credit history and can target products, which suit your credit health, towards you.
“Most individuals tend to not read the terms and conditions for online services or applications," said Amit Jaju, executive director, fraud investigation and dispute services, EY India.
As per global best practices, sharing personal data, especially with third parties, should be avoidable unless it is mandatory and the use of this data is known and is protected, Jaju said.
“Providing information such as income and PAN just to get something for free is not recommended, when the money saved is far less than the potential risks. The data collected by such ‘free services’ is directly or indirectly used for marketing or to cross-sell products, and in some cases even sold...to other companies," he said. The reason for this data-based marketing is that the cost of traditional marketing is much higher and has lower success rates compared to online targeted advertising strategies.
However, fintech companies say that the process is as safe as it can be. “The bureaus have given us a license and as part of the process, they do a thorough audit on our processes, including data security and infrastructure...they also have a right to audit us anytime. Our processes are in line with the bureaus’ requirements which is again in line with the law," Kukreja said.
While the process is safe, it is not very clear if the fintech firms need your permission to access your credit data every time, or if the permission is deemed to have been given for perpetuity. Different companies may have different norms.
So, before you get that free report, do keep these caveats in mind.