CIBIL may soon give one free credit report a year

You could soon be getting one free credit report a year from the Credit Information Bureau of India ( CIBIL).

A healthy CIBIL report and score increases one's chances of getting a loan and costs Rs 500. "By the end of the year, the Credit Information Bureau of India will start providing individuals with one free credit report a year, so that they can check their credit rating and petition if they see possible discrepancies," RBI governor Raghuram Rajan told delegates at a seminar on 'Transforming Rural India through Financial Inclusion'.

Research data based on CIBIL's data analysis indicates that 79% of loans and credit cards were approved for individuals who had a credit score of 750 and above.

"When an individual knows that a default will spoil their credit rating and cut off future access to credit, they have strong incentives to make timely payments," Rajan said.

CIBIL is also in talks with the government to broaden the ambit of the Credit Information Act that will allow it to use alternative sources of data for deciding the credit worthiness of loan applicants.

Credit assessment is becoming data-driven with information being collected from various sources like social media and digital transactions to determine the credit worthiness of an individual. A lot of financial technology startups are using their own data analytics as credit assessment tools.

There is huge scope for banks to lend to first-time borrowers for whom credit information is not available with them and other financial institutions. Therefore, while the change in regulations would take time, Chandorkar said Cibil would launch a new product which would give banks some information regarding lending to first-time borrowers.