Inform customers when banks ask for their credit score: What RBI has told credit bureaus

The new rules will come into effect within six months.

What are Credit Information Companies?

CICs maintain and analyse the consumer and business credit information of individuals and companies across the country, as provided to them by banks and NBFCs. Based on this information, a CIC calculates and generates credit scores for individuals and credit ranks for companies as per their creditworthiness and past credit history.

A customer can get a loan at a relatively attractive rate if their credit score is high. If the credit score is low — perhaps due to defaults on earlier loans — they may not get a loan or a credit card. However a customer’s credit score is not the only factor that determines whether she will get a loan.

TransUnion CIBIL Ltd, Equifax India, and CRIF High Mark are some prominent CICs in India. Where scores are awarded in the range of 300 and 850, and a score of 700 is generally considered good.

What if a customer wants to access her credit score at any time?

The credit score can be obtained from the CIC, usually against a payment. However, the RBI has addressed this issue directly in its circular of Thursday (October 26).

The RBI has said that CICs should provide easy access to a “Free Full Credit Report (FFCR)”, including credit score, once in every calendar year (January-December) to all individuals whose credit history is available with the CIC. The link to the FFCR must be displayed prominently on the CIC’s website, so that individuals are able to access their report conveniently, the central bank has said.

And what if a customer feels her data is not correct?

There is a process to apply for the correction of data in a customer’s CIR. In its circular issued on Thursday, the RBI said banks and NBFCs should inform customers of the reason for the rejection of their request for data correction, if any, so that such customers are better able to understand the issues in the CIR.

“A list of reasons for rejection of requests should be circulated by CICs to all CIs (credit institutions). CIs should use the same while communicating the rejections of the request for data correction made by customers and CICs during the grievance redress process,” the RBI said.

What steps should CICs take at their end?

The central bank said that CICs should have a board-approved policy for undertaking a periodic review, at least on a half-yearly basis, of the ‘search & match’ logic algorithm that they use to generate the borrower’s CIR. CICs should undertake a “root cause analysis” of complaints, use it to identify issues in the ‘search & match’ logic algorithm.

“Results of the RCA (root-cause analysis) and subsequent changes in the search and match logic should be placed before the Board of Directors of the CIC for review,” the RBI said. It asked CICs to “ingest credit information data received from banks and NBFCs as per its data acceptance rules, into their databases within seven calendar days of its receipt from them”.

Also, CICs should disclose on their websites the details of complaints registered against them and the CIs, the RBI said.