Who Issues Credit Ratings and Credit Scores in India?

Credit scores and credit ratings are generally calculated by the Credit Reference Agencies, or

Credit Bureaus. Each bureau has a different method for calculating credit scores. However, all

the credit bureaus take your personal and financial information into account while calculating

credit ratings and credit scores.

There are four (4) credit bureaus in India, namely – CIBIL (Credit Information Bureau (India)

Limited), Experian, Equifax, and CRIF High Mark. Each credit bureau has a different process for

calculating credit scores, so there isn't any "thumb rule" you can rely on. Whatever the number,

the general mantra is that better cindicate a higher risk of lending. When you apply for any type of credit product, your creditredit scores represent lower risk and lower credit scores

indicate a higher risk of lending. When you apply for any type of credit product, your credit

score is calculated based on your previous credit history to help the lender understand what

type of borrower you are.

How does Credit Ratings and Credit Scoring Work?

Lenders utilise the information provided by credit reference agencies to understand what type

of borrower you will be if they extend credit to you. Your credit file is just a collection of

information about you that represents your credit history and can help your lender determine

how risky a borrower you are.

The four (4) Credit Reference Agencies have different scoring models, and below is a snapshot

of each of the credit scoring ranges followed by the credit bureaus:

CIBIL Credit Score Range

Experian Credit Score Range

Equifax Credit Score Range

CRIF High Mark Credit Score Range

What are the Factors Considered by Credit Rating Agencies to Calculate your

Credit Ratings and Credit Scores?

A credit score is composed up of data gathered by credit bureaus and used by lenders and

financial institutions to assess your eligibility to borrow a given credit product. But what

information does a lender use to calculate your credit score?

a) Personal Details : They use the details you provided on the credit application

form. This is likely to include all the necessary information about your income,

employment situation, address, and so on that your lender needs. Although some of

these facts are merely formalities, others, such as your salary, can influence how

creditworthy you appear, simply because a lower income means you are more likely to

have difficulty repaying the credit.

b) Repayment History : Your credit score is influenced by your repayment history,

as lenders try to anticipate how likely you are to repay any debt that you have or ever

had. That is why it is critical to make timely repayments on your credit cards and loans.

c) Existing/Past Debts : Any previous credit agreements will be taken into

consideration as well. Existing credit cards, and personal loans are included. Your credit

utilisation, or how much of each credit facility you use, is a consideration that could

affect your credit score, since different lenders look for different degrees of credit

utilisation when determining lending requirements.

d) Credit Applications : You leave a trace every time you attempt to apply

for credit. Every time a lender, employer, insurer, landlord, or debt collection agency

examines your credit report, they leave a trace. If you receive a lot of inquiries in a short

period of time, it may appear that you're desperate for credit or having trouble paying

your bills.

When you apply for any type of credit product, a lender or financial institution is not required

to inform you which, credit reference agency they are planning to use for assessing your

creditworthiness. Banks and other lenders freely share data, which means they have access to

financial information about you from sources other than your credit report. It is also worth

noting that some lenders have their own scoring systems that they utilise instead of or in

addition to those of a credit reference agency.

Credit rating and credit scoring models are far more transparent than it once were, and

customers now have more control and insight over their credit reports. Before applying for a

credit, check your credit score to make sure everything is aligned so that your credit application

doesn’t get rejected. It is critical to ensure that the credit information on you is accurate and up

to date. If you are having problems obtaining credit, you can improve your credit score over

time by taking appropriate actions.