What are Credit Information Companies (CIC’s)?
CIC or Credit Information Company is an independent third party institution that collects financial data regarding loans, credit cards and more about individuals and shares it with its members. Banks, Non-Banking Financial institutions are usually the customers of Credit Information Companies. The Credit Card Company collects financial information about all these individuals and forms a credit report based on their financial history. This credit report plays a very important role as it helps banks and other financial institutions determine the creditworthiness of an individual applying for a loan or credit card with them.
Credit Information Companies Regulation Act (CIC Act)
Credit Information Companies in India are licensed by the Reserve Bank of India and governed by the Credit Information Companies Regulation Act, 2005 and various other rules and regulations issued by the Reserve Bank of India. The CIC Act, 2005 is a legislation that is enacted by the Government of India, in order to regulate the actions of the Credit Card Companies in India. Following the CIC Act, 2005, the RBI and the Government of India enacted the CIC Act, 2006.
List of Credit Information Companies In India
There are exactly four well known CICs in India as of now. Given below is a list of CICs in India:
- CIBIL - The Credit Information Bureau Limited or CIBIL was founded in the year 2000. It is also the first Credit Information Company of India.CIBIL boasts of over 900 strong member base including public and private sector banks, non-banking financial institutions and housing finance companies. CIBIL collects commercial and consumer finance related data and forms a credit report. The company also issues a score derived from this data known as CIBIL score. The CIBIL score plays a very important role when it comes to the approval of loan and credit cards. Any individual can purchase a copy of their CIBIL report for a cost of Rs.550 and have access to it within 3 days.
- Equifax - Equifax is a CIC that was founded in the year 1899 in Atlanta. It is one of the oldest CIC as of now. Equifax got its ‘Certificate of Registration’ in India in the year 2010 by the Reserve Bank of India. The company has a separate bureau dedicated to address the growing lending and regulatory needs of the Microfinance Institutions. The company charges a fee of Rs.138 for a basic credit report and a fee of Rs.400 for credit score.
- Experian - Experian Credit Information Company was established as a joint venture with several banks and financial institutions in India in the year in 2006. It was named as one of the ‘World’s most innovative companies’ by Forbes magazine in the year 2014. Experian prepares credit reports of individuals based on the information provided by banks and other financial institutions about the financial history of the individual. The company charges a fee of Rs.399 for a credit report and credit score while a credit report will cost just Rs.138.
- High Mark Credit Information Services - This Company not only provides credit reports to customers, but also caters to borrower segments such as SME, commercial borrowers and retail borrowers. It was established in 2005 in Mumbai. The company charges a nominal fee for a credit report.
How do Credit Information Companies's work
Credit Information Companies comply public data, credit transactions and payment histories of individuals and companies. The data is collected from various authentic sources and the companies form a credit report based on the collected data. The credit companies also create a score based on the credit report of an individual or an organisation. Usually credit score ranges between 350 to 850, anything above 750 is considered as a good score. The credit report and credit score plays a very important rule in an individual’s financial journey as banks refer to this report and score to decide the creditworthiness of an individual before granting a loan or credit card
Rules and regulations for CIC's
The actions of Credit Information Companies is regulated by the Credit Information Companies Regulation Act, 2005, enacted by the Government of India. Following the CIC Act of 2005, the RBI and the Government of India followed up with the Credit Information Companies, Regulations and Rules Act, 2006.
According to the Act, only certain entities are allowed to be members of the Credit Information Companies. Given below is a list of entities that can be members of CICs.
- Credit Institutions under Section 2(f) of CIC Act.
- Credit information companies under section 2(e) of the CIC Act.
A CIC, a credit institution or any authorised individual can request for a credit report anytime. A CIC will adapt to a format approved by RBI during such instances and furnish the requested information within a given time.
If there is any dispute between the CIC and its member related to credit information, the dispute shall be settled by conciliation under the as provided in the Arbitration and Conciliation Act, 1996.
Who has access to these reports?
Given below is a list of entities that can have access to a credit report from a Credit Information Company:
- Credit grantors
- Insurance companies
- Collection agencies
- Employers with the permission of the individual
Frequently Asked Questions on CIC
- What is a Credit Reporting Bureau?
A credit reporting bureau is a third-party institution that garners and manages records related credit card payments and mortgages of consumers and commercials from various financiers/lenders.
- Which are credit rating bureaus?
The Reserve Bank of India has established and licensed four credit rating bureaus that include CIBIL, Equifax, High Mark, and Experian. The agencies shall be administered by The Credit Information Companies (Regulation) Act, 2005 and rules and regulations issued by the central bank of India, the Reserve Bank of India.
- What is credit bureau data?
Each credit rating agency collects financial data of consumers and commercial entities from various lenders. Consumer credit data includes account history, payment history, property information, public domain information, delayed payments, missed payments, and loan approvals and rejections. Commercial credit data includes company details, principal information, auditor’s information, commercial judgments, and previous inquiries.
- What is the ultimate objective of credit reporting bureaus?
Credit rating bureaus collect financial details of individual customers and commercial entities. The most common categories of credit data accumulated by agencies include account history, payment history, outstanding loans, outstanding credit card payments, account details etc. The agencies generate Credit Reports based on financial information collected by lenders and bankers. The ultimate objective of these agencies is to rate individual customers and commercial entities. Banks, licensed financiers, and Non-Banking Finance Corporations (NBFCs) use consumer credit rating as criteria while offering financial products.
- What does a credit rating agency do?
A credit rating agency collects financial data from participating lenders and creditors. The overall credit history of credit applicants shall be reported back to financial institutions. The agency generates credit reports for individuals and corporations to rate on a separate scale. Individuals are assessed in the range of 300 to 900.
The agency considers the following elements while rating companies:
- Overall debt capital of the company
- Previous debt history
- Debt repayment capacity
Credit bureaus collect financial details from all financial institutions including banks, authorised lenders, and Non-Banking Finance Companies (NBFCs). The Reserve Bank of India has made it compulsory for all lending companies to furnish the financial details to credit rating bureaus. Bureaus use multiple sources to collect data.
Credit card companies and banks are the most common users of credit bureaus data. Other users are insurance companies, landlords, debt collection agencies, and licensed lenders.
The Credit Information Companies Act, 2005 was enacted to regulate credit rating agencies and facilitating efficient allocation of credit. The Government of India and the Reserve Bank of India have enacted the Credit Information Companies Rules, 2006 and the Credit Information Companies Regulations, 2006. These two are collectively called the CIC laws.
Yes, you can. You can obtain a free copy of credit reports once a year from each agency. It is ideal to review credit reports periodically to check for correctness and completeness. Check your free Credit Score in less than a minute. Errors in reports can be rectified. Credit rating agencies are also necessitated to provide you a free copy in the following circumstances:
- A denied application due to details on your reports
- An unemployed person looking for a job change within 60 days
- If you are a victim of identity theft and are on welfare
Yes, credit rating agencies only provide the required information to creditors and lenders to approve or deny specific financial products. They do not make a credit decision.