This is the era of high spending. The truth is today people spend more than their grandparents or parents ever did.
Increasing incomes, the desire to own a house in one's early twenties, the availability of variety in lifestyle and brand choices, a booming economy, a growing number of entrepreneurs, new business establishments, etc, are leading to a tremendous amount of money outflow.
Money rotation is a key factor in a progressive economy and this means there is a lot of lending. In the event of such rapid money outflow from bank coffers, several questions -- like how does one keep a tab on all the credit lent, how does one identify defaulters and refrain from re-lending to them -- began to crop up.
To seek a solution to these queries, the government of India and the Reserve Bank of India got together to bring CIBIL (Credit Information Bureau India Ltd) into existence.
Currently banks, financial institutions, state financial corporations, non-banking financial companies, housing finance companies and credit card companies are members of CIBIL.
The idea behind setting up CIBIL is to gather all existing consumer and commercial credit information and pool it in a one-point source, for reference.
As in, an individual or commercial establishment could have accounts in several banks and credit from different lending institutions. All such data can be pulled out at one single point, for a quick reference check on the individual or commercial establishment seeking a loan.
This helps the lender, be aware of the repayment track record of the loan seeker and quickly decide on loan eligibility. According to the nature of the track record, a borrower is given a credit score. A poor credit score will make getting a loan, a difficult proposition for the borrower.
CIBIL acts as weeding mechanism that helps identify poor repayment track records. It helps protect lenders from giving credit to people and establishments who are unlikely to repay what is lent. Even if credit is provided, it is done so at a very high rate of interest, thereby ensuring that the bank is able to recover a considerable sum of money even if a default happens some time into the loan tenure.
On the other hand, if you have an impeccable repayment track record, you can reap benefits from it! Banks provide a lower interest rate for sound credit profiles that have excellent credit scores and such 'Credit Information Reports' can work to your advantage.
It also helps lenders and banks quickly process a loan, without wasting valuable time on research and background check on the loan applicant.
Well, this is the brighter side of things. There is a flip side to this, too. As with all mass processing systems that are not dependent on a single source for information, there are quite a few things that could be incorrectly recorded in the credit information reports, which are stored with CIBIL.
Here are a few instances, detailed for your understanding:
Lack of updated info: You might have defaulted on a sum of money, say Rs 12,000 but repaid the sum later, maybe well past the due date for the payment. There could be instances where CIBIL did not get the updated info for its records. This will show up as a default and will affect the calculation of a good credit score.
Confusion of names: There can be thousands of names that are similar in the CIBIL database. Things can go haywire if a person who shares your name has defaulted and all his defaults get recorded in your file.
There was this 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 until 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 Anjum's bouncing cheques, as defaults on loan payments in Anju's credit report. Today, Anju is a relieved woman.
Human input error: The information that goes from the banks to CIBIL on a loan or credit card payment default may have been erroneous due to a simple input error by one of the bank employees.
There was this instance when there was an accidental default of a month overdue payment of Rs 18,000 of one Tanushree Omkar. She cleared it the next month. However, the record that went to CIBI, had two additional zeroes, which made the default amount to Rs 18 lakh (Rs 1.8 million)!
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, 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 to be checked.
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 captured his PAN card details using a clever ploy. Anupam recalled that someone had wanted to deliver a mail from his local bank only on the basis of 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. The impostor then went on to open an account with a bank entering all the details he had gathered on Anupam 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 had directed all bank communication to another address, got a credit card on that account and spent indiscriminately until the card was locked by the bank due to several defaults on repayment.
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.
Fixing an incorrect CIBIL record
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.
Get in touch with CIBIL by calling their help desk numbers at 1800 - 224 / 245 or +91 22 6638 4600 / 2281 7788 provided on their Web site, 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.
The importance of the control number
The control number is a nine-digit unique number that helps CIBIL track an individual's credit t 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 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 an uncooperative bank
When the bank is uncooperative you could post a complaint on the bank's Web site 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 Web site as proof.
You can either register this complaint through their Web site, 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 to credit reports for borrowers
It is the need of the hour for CIBIL to allow borrowers to access their respective credit reports not only on cases when the 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.
The author is head of content & research at BankBazaar.com
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