Credit Information Company

A lender deciding whether to advance Rs 40 lakh cannot know, on its own, whether the applicant already has four credit cards at their limit and a personal loan in arrears at another bank. The credit information company is the institution that makes that knowable.

Every bank, NBFC and housing finance company reports its borrowers' behaviour to these companies every month. The companies collate it, and out of it build two products: the credit information report, which lists the loans and how each has been serviced, and the credit score, a single number summarising the record.

The reporting is compulsory, which is why the system works. A borrower cannot opt out of a bad record, and cannot build a good one anywhere except by repaying.

Licensed and governed. A credit bureau is licensed by the RBI and governed by the Credit Information Companies (Regulation) Act, 2005, together with the CIC Rules, 2006 and the CIC Regulations, 2006.

Who they are. The workbook names four: TransUnion CIBIL, Experian, Equifax and CRIF High Mark.

What is reported. Outstanding loans and credit facilities used, repayment behaviour, utilisation of credit limits, the type of loans — that is, the proportion of credit card outstanding, personal loans and other unsecured loans — and other factors affecting the ability to service loans.

Who may ask. Credit information reports can be obtained by specified users listed under the CIC regulations: credit institutions, telecom companies, other regulators, insurance companies, stock brokers, credit rating agencies and resolution professionals, among others. Individual borrowers can obtain their own report as well.

The score. CICs also offer value-added products such as credit scores. The CIBIL TransUnion Score is a three-digit number ranging from 300 to 900, and lenders use the score and report to decide interest rate, loan eligibility and credit limits.

Rohit applies to two lenders for a Rs 40,00,000 home loan over 20 years. Both pull his report from a CIC before quoting.

The report shows: a credit card with a Rs 3,00,000 limit running at Rs 2,70,000 outstanding (90% utilisation), a Rs 4,00,000 personal loan taken eleven months ago, and one car-loan EMI paid 47 days late in the previous year. It also shows that he stood guarantor on his brother's loan, which has two missed instalments — because a person's credit score is affected by repayment behaviour on loans where they are a joint holder or guarantor.

Assume the first lender offers 8.50% to its best-scoring applicants and 9.25% to this profile — the workbook does not publish rate cards, only the principle that the score determines the rate offered.

Nearly Rs 4.7 lakh, decided by a three-digit number. That is the adviser's case for the housekeeping the workbook prescribes: pay dues on time, keep credit utilisation low relative to the limit available, avoid a heavy tilt towards unsecured credit, keep a mix of secured and unsecured credit, make credit enquiries only when required, and review the report periodically so errors can be identified and rectified.

Two chapters carry it, which is why it recurs. Chapter 4 (Debt Management and Loans), section 4.4.1, covers the role of credit bureaus and the credit score from the household's side. Chapter 5 (Introduction to Indian Financial Markets) lists CICs among the entities regulated by the RBI and gives the institutional detail — the four companies, the governing statute, the specified users. Expect questions on who licenses a CIC, which statute governs it, and what a credit score is built from.

• The RBI licenses credit information companies, not SEBI. They sit in the RBI-regulated list alongside payments banks, NBFCs and account aggregators.
• The score is a product of the CIC, not the regulator. The CIBIL TransUnion Score runs 300 to 900; other bureaus publish their own scores on their own scales.
• Reporting is monthly and comes from the lenders, not from the borrower. Nothing a borrower says to a bureau changes the record; only a rectified error does.
• Guarantor and joint-holder behaviour lands on your report. Standing surety for a defaulting relative damages your own score.
• Rescheduling a loan hurts the credit history. The workbook says so explicitly in section 4.3 — it is a legitimate way out of a debt trap, but it is not free.
• Do not confuse a CIC with an account aggregator, which is also RBI-licensed but consolidates and shares customer financial information with the customer's express consent, revocable at any time. A CIC needs no consent from the borrower to receive lenders' monthly reporting.