Equifax Vs CIBIL Vs Experian Vs Highmark Credit Score & Credit Report

What are the functions of Credit Bureaus?

The major functions of the are:

Their primary function is to provide crucial data for lending decisions made by various financial institutions like banks, mortgage lenders, and credit card issuers. Operating within a regulatory framework, credit bureaus are often overseen by financial regulatory bodies.

Who regulates the Credit Information Companies (CICs) in India?

In the Indian context, Credit Information Companies (CICs) are regulated by the Reserve Bank of India (RBI) under the Credit Information Companies (Regulation) Act, 2005. Consumers also engage with credit bureaus as customers, utilizing services that offer insights into their credit history. As per regulatory requirements, individuals are entitled to request a free full credit report, including the credit score, once a year.

Responsibilities of Credit Bureaus

1. While bureaus provide the means for lenders and creditors to make informed decisions concerning loans, credit cards, mortgages, and other types of credit and financing.

1. Credit bureaus are required to compile a thorough collection of credit-related data from different sources, such as banks and other financial institutions; lenders; collection agencies; and public records.

1. Credit bureaus must maintain large databases of reported credit accounts and constantly update these databases with any changes to the credit accounts of individuals or businesses.

1. Credit bureaus must generate detailed credit reports, which will contain a person's or company's complete credit history, including personal information, repayment history on all credit obligations, credit usage, and all inquiries made into the individual's or company's credit.

1. Credit bureaus provide lenders with three-digit credit scores that are a numerical representation of an individual's or company's creditworthiness and are derived from the individual's or company's credit report.

Comparison of the 4 Credit Information Companies in India

1. TransUnion CIBIL: Established in 2000 with Reserve Bank of India (RBI) license, CIBIL is India’s oldest and most well-recognised Credit Bureau. Also, CIBIL offers one free credit report with a score every year, with reports available automatically online after payment or a request upon instant delivery. CIBIL compiles extensive credit histories from banks and significant lenders and is often where lenders turn first for evaluating credit applications for Personal Loans, Home Loans and Credit Card applications.

1. Equifax India: Equifax received its India license to operate as a Credit Bureau in January 2010. They also offer one free credit report with a score (annually) and instant online delivery after you authenticate yourself. Equifax will include both Individual and Commercial credit data, and has great depth of analytics, data segmentation and extensive reporting capabilities across all lending categories (including Microfinance).

1. Experian India: Experian began its RBI licensing process in 2006 and received a license in 2010. Experian offers one free credit report with a score per year and will provide instant delivery of your report through their website. Experian also offers the Indian credit market access to international credit scoring models and international analytics. Often, Experian will place added weight (points) on recent behaviours in scoring. Many FinTech and Digital Lenders favour Experian due to that lender’s dynamic scoring updates.

1. CRIF High Mark: This was established in 2007 and received its RBI license in 2010, offering one complimentary credit report and score annually. Reports are emailed instantly after payment. CRIF High Mark serves all types of borrowers, from individual consumers to MSMEs (Micro, Small and Medium Enterprises) and commercial borrowing. It also provides banks, lenders, lenders’ customers and other financial institutions with analytics, solutions and software to assist them in lending.

Similarities Between the Credit Bureaus

1. All four credit bureaus in India are licensed by the Reserve Bank of India (RBI).

1. Lenders, including banks and NBFCs, share credit information with all credit bureaus equally; they do not differentiate between them.

1. Each bureau uses its own algorithm to calculate credit scores.

1. Credit scores from all bureaus are considered valid for lending purposes.

1. Despite differences in algorithms, the five key components considered while calculating a credit score are the same across bureaus:
   1. Repayment history
   2. Type of credit
   3. Age of credit
   4. Credit exposure
   5. Credit inquiries

1. Credit scores from different bureaus may differ slightly.

1. A marginal difference of around 50 to 60 points between bureaus is commonly observed and accepted by lenders.

Benefits of the Consumer Credit Database

The Consumer Credit Database offers several benefits to lenders:

1. Lenders have less risk when using this database. Lenders can look up a customer's credit inquiries and trade lines throughout their credit history to determine if the customer is trustworthy and how much risk they are taking on.

1. Lenders can make faster, more accurate lending decisions using the credit scores and Credit Information Reports provided through this database. With these two pieces of information, lenders have a good idea of the customer's ability to pay both in the short and long term.

1. A central repository of borrowers allows lenders to regularly assess their borrowers' performance, ensuring timely adjustments and better portfolio decisions.

1. The consumer credit database contains extensive data, often used in conjunction with government databases like PAN and Aadhaar, which makes it easy for lenders to verify the identity of their customers.