“Somebody is always watching.” While this sounds more like a line straight out of X-Files, alien movies or pseudo CIA spy novels, it seems to fit so aptly when one thinks of the Credit Information Bureau of India Limited (CIBIL). CIBIL is a privately owned company, which collects credit information on over 140 million credit card holders and loan takers.

The company is owned by a syndicate of banks now, but was originally promoted by the State Bank of India (SBI), Housing Development Finance Corporation Limited (HDFC), Dun & Bradstreet Information Services India Private Limited (D&B) and TransUnion International Inc (TransUnion). A number of banks, including Bank of India, HSBC, ICICI, Central Bank, etc, now hold stakes within this firm.

CIBIL is India’s first credit information bureau. This credit information bureau was formed on the basis of recommendations of a working group constituted by RBI to establish a world class bureau in India in the private sector, which would be a technology-driven service provider.

It helps banks, financial institutions and other financiers to share credit histories of retail and commercial customers. The bureau provides both positive and negative information about bank’s borrowers, which empowers lenders in assessing the credit worthiness of potential customers.

How do they work?

CIBIL shares a relationship with all banks based on the concept of sharing. They collate the credit information available from all financing institutions, which are its members, and provide an informed report, which takes into consideration all the financial activities of a consumer when asked for by the bank. The need for having an independent body for doing this is to keep checks and balances.

Suppose a person has taken a loan from one bank where they have paid their EMI?s promptly, however, on another loan taken from a second bank they have defaulted on the payment. In this case, when this customer applies for a credit card or loan again, say to the first bank where his record is impeccable, the bank, by following the norm, would seek out his credit report from CIBIL, which would then show his default oh his prior loan with the other bank.

CIBIL works mainly on the concept of reciprocation. Therefore, only those banks, which share all their customers? credit information with them will be given access to the credit reports that CIBIL has. CIBIL?s primary job is to collate data on the credit worthiness of all borrowers from banks and prepares customer information reports (CIR) to help credit grantors make faster and more objective lending decisions.

Industry players believe, with a bureau in place, responsible customers can expect faster and more competitive services at better terms and rates from banks and other credit companies. Based on CIR, the credit bureau would assign a credit score to every potential borrower which would bring about the differentiation in rates.

Victims of the system

Desai was looking to buy a new car and decided to take an auto loan to do the same. Having been informed by his bank previously that he should be eligible for a pre-approved loan due to his great track record, he was given a pre-approval number and asked to go ahead and start looking for his car, which he would be able to purchase soon. The loan was in fact granted to him via the phone itself, since it was his bank. A few days later when the loan amount was suppose to be cleared, he was contacted and informed that the loan cannot be granted since his CIBIL report shows him having outstanding payments on a credit card that was closed two years ago. This was not possible since the card dues had been paid and the card had been inactive for the past two years. To fix the issue, Desai had to contact the bank, which had issued that credit card and get a clean chit from them regarding the same.

Having gone through this process and been lucky enough to have the bank acknowledge their error, the next step was to send a mail to CIBIL and the bank with a nine digit number corresponding to the fact that an error was made by the bank and it should be rectified in his credit report. This report can then take up to 60 days to be modified and only once that is done will he be able to get a loan.

Credit score

In the US, one can buy their credit score and there is transparency in checking on and determining one?s credit score.

The announcement made by S Santhanakrishnan, chairman, CIBIL, in 2007 when they launched their score was, ?It will predict the likelihood of a customer becoming a defaulter in more than 91 days on one or more lines of credit, including credit cards, personal, home and auto loans by next year. It will help the good customers to get loans at competitive rates, and those with low scores will have to pay higher rates. First, the credit score will be prepared on individual customers, and, gradually, we will compile a list on industrial defaulters. The credit score on individual customers will be prepared in a transparent manner.?

Sadly speaking, the reality in a year and half from then is very different. The proprietary scoring method used by CIBIL and TransUnion has not yet been widely accepted as a basis for granting loans amidst all banks. However, it does play a role in sorting customers. The biggest letdown however with this scoring system has been the lack of transparency. Understandably, a proprietary scoring system cannot be disclosed openly in terms of formulae and weightage. However, this has left most people out of the loop with very few people knowing how this scoring system works or being able to judge how accurate it is. Say you have asked for a personal loan from a bank. If you have gotten a call from a bank offering you a loan, and, you do not have any past record with this bank, then the bank posts an online query with the credit bureau. Your application will then be evaluated on the basis of your repayment history, other loans and a host of other factors like income, age, security and number of dependents in your family. In this case, a good credit record is one of the best indicators of your basic creditworthiness. A CIR is a snapshot of the borrower?s credit and repayment history. If it reflects a good past payment history of the borrower, it may lead to credit being granted on better terms. If a borrower has defaulted on a bank loan, others can use this information to take a decision on further credit delivery. This would also make the way for differential pricing. It would help in lowering the cost of a loan. Hence, lenders will be in a position to offer a lower price to good borrowers. The bank receives CIBIL?s response in the same working day, which helps to arrive at a valid credit decision. While one cannot be sure of all the components that go into making a good credit score, we do know for a fact that CIBIL does not collect any income information on customers and hence one can broadly guess the criteria used to determine an individual?s credit worthiness. The parameters for a good credit score are previous track record of loan repayments, default rate, payment delays and outstanding loans.

Punctuality of payment in the past, amount of debt expressed as the ratio of current revolving debt to total credit limit, length of credit history, types of credit used (installment, revolving, consumer finance), amount of credit obtained recently, are parameters used globally and are likely to be used in India as well.

As a customer you do not have access to your credit score directly from the credit bureau. As per CIBIL norms, customer information reports (CIRs) can be accessed only by member banks. Further disclosure to any other person is prohibited. However, if the bank has drawn a report on you, then you can obtain a copy of the same from the bank However, a person can access their credit reports directly as well now-a-days by putting in a request to CIBIL directly. One can then go through their report and if there are errors found, one can notify the bank and CIBIL regarding the same. While some people have found out their credit score as well, which is usually a number between 300-900, why is that their score or how can they improve it, if they have no defaults to their name, is still unknown.

Fine tuning the sysytem

While CIBIL has a large task at hand, one expects them to grow at a massive rate over the next few years and undergo considerable changes to fine tune their rating process, to finally bring differential interest rates into India, abolishing the standard rates model we follow currently. This will definitely benefit those customers who have a good track record and have managed their credit well in the past. On an average a defaulter whose name is on the CIBIL list, and he/she has actually defaulted by intent or circumstances, their name remains on the list for at least 7 years, during which getting an credit card or loan is virtually impossible.

The quality of CIBIL reports have further been helped by certain government measures like introduction of PAN numbers and making the same mandatory for availing most banking services. The PAN number may be considered as a very crude form of a Social Security Number, since only tax paying individuals apply for it i.e. people not falling in tax bracket or not wanting to pay tax, may or may not have PAN no. This list acts a weeding system to pull out those customers who either in their juvenile past have misused or abused their credit cards or are chronic defaulters. However, there is a chance that individuals who have had fights with their banks and not made payments could be on this list, in which case if the bank refuses to co-operate, then legal recourse is the only option available. The consumer courts already see many such cases and may see a whole lot more in the future as people start accessing their credit reports and wanting to improve their credit scores as banks continue to have tighter lending policies.

Unfortunately, in India the legal system is still rather weak, and till then it looks like banks and especially CIBIL hold most peoples credit worthiness in their palms. The good thing is there are other credit bureaus emerging in India now, namely Equifax Credit Information Services and Highmark Credit Information Services and the latest to join them is Experian. However, amidst all these as of now CIBIL is still the primary place of information for most banks and it ma remain so for a while, due to its large data base. Therefore, understanding what CIBIL is, what it means to you, and keeping in mind that someone is always watching what you do with your credit taken, will go a long way in easing ones borrowing ability in the future.

Fixing errors in your CIBIL credit report

Errors and inaccuracies are possible with your CIBIL report. If you need to seek clarifications in your credit report, here are the steps you should follow:

a. Contact the bank that declined a credit card or loan application on the basis of your poor credit score. Ask them for a clarification on the poor credit score and request them to provide the control number for your credit report.

b. The bank will provide you with the control number of the credit report and also share the information on the credit report that is responsible for your poor credit score.

c. Get in touch with CIBIL by calling their help desk numbers at 1800 – 224 – 245 or +91 -22 6638 4600 / 2281 7788 provided in their website, http://www.cibil.com. You could also drop in an email at info@cibil.com referring your credit report?s control number. When attempting to clarify the information on your credit report, you need to inform CIBIL about the exact nature of the discrepancies in the report that you have been made aware of, by the bank.

Importance of the control number

The control number is a nine digit unique number that helps CIBIL track an individual?s credit report from its database. Banks feed in borrower data and personal information, which the CIBIL systems pool together. The control number is generated when banks pull out your credit report on a requirement basis.The control number is a unique number, which is generated every time any bank or credit institution pulls out a credit report on you.

CIBIL requires this number because it enables them to view the exact details that the bank has seen when they drew a report on you. Hence, it is important for you to request the bank to provide you the control number.

Dealing with uncooperation

When the bank is uncooperative you could post a complaint in the bank?s website and if the bank does not respond within 15 days, you can register a complaint with the banking ombudsman, presenting a copy of the complaint posted on the bank?s website as proof.

You can either register this complaint through their website, http://www.bankingombudsman.rbi.org.in or locate the nearest branch office through this link, http://rbidocs.rbi.org.in/ rdocs/Content/PDFs/68033.pdf to register your complaint.

Need for direct access

It is the need of the hour for CIBIL to allow borrowers to access their respective credit reports not only on cases when information needs to be verified but also as a way for individuals to keep a tab on their money inflow and outflow. This will help them weed out errors, clarify facts and more significantly, identify impersonations before it is too late.

Checking for and correcting inaccuracies

Pratima Mathur was feeling extremely angry. How could the bank do this to her? She was a stickler for immaculate money management skills. She never once defaulted or made a late payment for that matter even on her telephone bills. She had maintained all her accounts with her friendly neighbourhood bank, whom she has banked with in all of 15 years, since she got her first pay cheque. She had been saving up religiously for the past 10 years to accumulate enough monies to buy a car and a cozy, contemporary apartment for herself.

Once she had her down payment secured for her apartment, she zeroed in on a really neat one, which was fitted with all the up-to-date amenities. It was located at a very accessible distance to all the places she frequented, be it shopping malls, hospitals, multiplexes, the beach and of course her workplace. She even got the best interest rate in the marketplace with a popular housing finance company. Everything was coming together nicely when the big blow came. The HFC called to say, they could not proceed with her loan disbursement because she had a poor credit score! Armed with reams of paperwork and credentials from her still friendly neighbourhood bank, who unfortunately did not have the kind of interest rate on the loan she wanted, she was ready to tackle the matter. After several attempts at calming Pratima?s indignation and succeeding finally, the HFC said they would be able to provide access to her Credit information Report. However, they also told her that if she wanted any clarification on the details mentioned, she should contact CIBIL and seek those clarifications.

To err is human and Pratima?s `Credit Information Report? is no exception to this fact. Errors could have easily crept up in her report that comprises of numbers. Incorrect information about her credit accounts, input errors and confusion caused through similar looking account information, names etc. could have resulted in the errors in her report. Currently there are no facilities enabled by CIBIL, unlike the practice abroad, where an individual can request his or her credit information report from CIBIL, even before he is about to make a credit transaction or apply for a loan. However, if an individual has applied for a loan and has been rejected the loan because of a poor credit score, he can then request the bank to allow him to access his credit report to seek any clarification on the information provided in the report. Pramita had the option of getting in touch with CIBIL with the control number of her credit report, which the HFC provided her with.

When attempting to access your credit report you also need to provide CIBIL with your loan details, the exact knowledge or discrepancies in the report that you have been made aware of by the bank and for which you seek clarification. Of course, you need to pass on essential information such as your full name, date of birth, address, phone numbers, Pan no, Voters Id and Passport no to help CIBIL assist you. In Pratima?s case, she was fortunate to communicate the discrepancies in her credit report and get it rectified in a matter of days. Her persistence paid off and the HFC was more than happy to sanction her loan amount. Right now, Pratima is happily cocooned in her cozy, contemporary apartment and in the past five years has never defaulted on her EMIs even once.

Things that can go wrong in your report

There are quite a few things that could be incorrectly recorded in the credit information reports that are stored with CIBIL. Here are a few instances, detailed for your understanding.

Confusion of names: There can be lakhs of names that are similar in the CIBIL database. Things can go haywire if a person with your name has defaulted and all his defaults get recorded in your file. There was one instance, which a loan applicant reported, her name Anju Jadeja was confused with Anjum Taneja. Turns out Anjum Taneja passed away tragically in a freak accident, with nobody able to identify her, till bank authorities decided to investigate the applicant after CIBIL corrected and ratified Anju Jadeja?s credit report. Till that point in time, the bank had put down her bouncing cheques as default payments, issuing warnings, etc on deaf ears. Today Anju is a relieved woman.

Human input error: The information that goes from the banks to the CIBIL on a default may have been erroneous due to simple input error by one of the bank employees. There was this instance, when there was an accidental default a month overdue payment of 18,000 of one Tanushree Omkar, which she cleared the next month. However, the record that went to CIBIL, had two additional zeros, which made the default amount to 18 lakh.

Identity Theft: This is the most serious of all causes of errors and can have a disastrous impact on a person?s credit profile. In recent times, identity thefts are on the rise. Right from a petty shopkeeper who swipes your card several times to sneak in an unofficial payment or track credit card details, which he can exploit, to a terrorist who wants to access a billionaire?s account in a remote corner of the world, identity theft is becoming a serious crime that needs check. If you are a victim of identity theft like Anupam Shekar was, then it is time to get your financial log in order. Keep track of all the cards that you use or do not use. In Anupam?s case, an impostor had somehow captured his Pan Card details (he later recalled, that someone had wanted to deliver a mail from his local bank only on the basis of an identification and had been examining the Pan Card given with great curiosity. It was then that it struck him that anyone could access his mailbox in the huge apartment complex he resided in and opened an account with a bank entering all the details he had gathered on him by accessing his mailbox. Anupam did not know for a long time about this until he decided to apply for a new credit card and his bank rejected him outright labelling him a defaulter. Anupam had to go to great lengths spending precious time and energy to clear his name. Apparently the impostor opened an account directed all transactions to another address, got a free credit card on that account and spent indiscriminately until the card was locked by the bank due to several defaults. The account was frozen but the impostor walked away scot-free to scout for his next victim, but not before Anupam Shekar?s credit report was tarnished beyond repair.

It is the need of the hour for CIBIL to allow access to an individual?s credit report not only on cases when the fact needs to be verified but also as a way for individuals to keep tabs on their money inflow and outflow. This will help them weed out errors, clarify facts and even identify impersonations before it?s too late.