Importance of Credit Report: How to Know Your Credit Score For Free?

• Posted By Amritesh
• On September 21st, 2017
• Comments: 6 responses

Credit Report has gained importance over the years with the Financial Institution being very particular about credit worthiness of the applicants for Loans or Credit cards. Credit Report provides the complete information on Individual’s credit history along with details of his/her past financial transactions. This report helps the Lenders to decide on the Credit Worthiness of the application made for loans and even credit cards. The quantum of Loan or the Credit Card limit is determined by the Credit Score of an Individual.

Credit Information Bureau India Limited (CIBIL)

What is Credit Score/Report issued by Credit Reporting Agencies?

Credit Report is the detailed record of an Individual’s Credit History based on it the Credit Score is generated. Credit Bureaus or Agencies collects all the information necessary for preparation of the report and provides the same to the lending institutions. The report includes the previous loan payment, credit card expenditure and payment details along with other relevant data.

The report helps the Lending Institutions to decide on the Credit Worthiness of the Loan or Credit Card applicant. It is also used to determine the quantum of loan which may be extended to any Individual. Credit Score normally ranges from 300-900, with higher score showing greater credibility and less risk. Even Individuals with credit history of less than 6 months are evaluated and risk index is provided for them. Any score above 750 is considered to be respectable by the lenders.

Who are Credit Reporting Bureaus or Agencies?

Credit Bureau or Agency is known as Credit Information Company (CIC) in India. Credit Information Companies are governed by Credit Information Companies (Regulation) Act, 2005 issued by Reserve Bank of India (RBI). So, RBI directly is not involved with the CIC’s but regulates their workings through the Act.

Credit Reporting Agencies are of two types, reporting either on Individuals or Business. In this post we will restrict discussion to the reporting on Individuals.

Currently, Four Credit Information Companies are operating in India with the approval from Reserve Bank Of India (RBI). They are:-

TRANSUNION CIBIL Limited (Formerly known as Credit Information Bureau of India Limited)

EQUIFAX Credit Information Services

EXPERIAN Credit Information Company

CRIF HIGH MARK Credit Information Services

Role Of Credit Information Company (CIC)?

CIC’s primary role is to bring transparency by providing factual report to the concerned entities relating to the previous financial dealings and credit history. It gathers information periodically from the different Banks and Financial Institution and the same is used to prepare the Credit Information Report and Credit Score. The information includes the all the details of past financial transaction such as Loans availed, loans repaid, duration and delay in repayment of loans and other relevant credit details.

After the assessment of the past credit history and financial transactions, Credit Score is provided to an Individual. The lenders use this Credit Score as one of the important parameter to determine eligibility of the loan or credit card applicant.

How to Check Your Credit Score For Free?

As per, Reserve Bank Of India (RBI) guidelines, CIC’s are to provide a free Annual Credit Report (Once a Year) to help Individuals know about their credit worthiness. Individuals may log in to the portal of any of the CICs and provide the required details to obtain the Credit Report. I have provided links of two CIC’s portal for reference.

Transunion CIBIL Credit Score

Experian Free Credit Report