Fee For A Credit Report Versus Free Credit Report: Part 1

In a credit information reporting system, typically the four stakeholders are:
1. The central bank (in the case of India – the Reserve Bank of India)
2. The lenders (credit providers)
3. Credit bureaus (there are currently 4 in India)
4. The borrower (the individual or the entity that takes a loan and whose data is reported by the lenders to the bureaus)

Everyone will agree that the last category (borrower) is most impacted by this system as the report and the score affect getting loans in the future, the interest rates charged and so on. The problem is further compounded by the fact that the borrower realises this fact only when his/her loan application gets rejected due to poor credit history in the past and low scores. Then panic sets in with a desperate attempt to ‘sort things out.’

People do get delinquent – I have always believed that the best and the only way to have zero delinquencies is not to lend at all. But whether there is a genuine reason or fraudulent intent – people do default. And all these get into your credit report as bad history and thus affect your credit score negatively.

But poor credit behaviour is not the only reason why a report looks bad or a score is low. Identity thefts, incomplete or wrong data reporting by the lenders to the bureau, errors in matching and merging by the bureaus are some examples where this can happen although the borrower is not at fault.

Being aware of the scenario well in advance helps as you don’t have to face a crisis at the time you are trying to borrow – that is the best advice you can get. So it makes sense to do a few things in advance. Check your report and your score periodically and regularly; make sure the information is yours and yours only, and no one else’s data got mixed up. After sorting this out, check your report and score again to ensure that the errors have been taken care of.

To do that, you need to access your report and your score from the bureaus. Each time you have to pay between Rs 130-470, depending on which bureau you are approaching and whether you are only getting your report/score (you can require it at any time and not just when you are a defaulter) or you want to get it checked by the lender for errors in reporting or want to match and merge the errors made by several bureaus and so on.

There is a case here and even the RBI-appointed committee, on looking at the credit information system in India, has recommended the need for a free report to be made available once in a year, to every individual.

That is, indeed, a great idea and needs to be considered as it is more customer-friendly.

Watch this space next week for the concluding part of this article.

About the author: Satish Mehta is the Founder and Director of Credexpert, a credit and debt counselling company in India.