Loan rejected? Your ID may have been stolen

MUMBAI: If you have been rejected for a card or a loan gratuitously, there is a strong likelihood that you are a victim of identity theft. Identity theft for small loans or cards does not come to light because lenders do not pursue them beyond communicating to the credit bureau. The default, however, prevents the victim from getting loans in the future.

Mumbai-based Credit Sudhaar — a group that provides counselling as well as loans to subprime borrowers — has come across the startling fact that one out of five customers are not getting credit because they have a bad score following identity theft.

According to Arun Ramamurthy, director, Credit Sudhaar, there have been so many cases of identity theft that the firm decided to buy a group insurance to cover legal expenses and meet any obligations to pay up to Rs 3 lakh.

“Many people are not aware of credit bureaus and even those who are aware do not know how to read a credit report,“ he says. “There are organised syndicates who fraudulently acquire KYC documents.This is sometimes done from direct selling agents.“

He adds that while a biometric identification under Aadhaar would prevent misuse, there are not many institutions that have linkages to do a KYC based on biometrics.“We are a unique group with a credit counselling company and lending company in the same fold,“ says Ramamurthy.

“Our target market is those customers who have, for circumstantial reasons, defaulted on a loan“ Founded in 2013 by ex-bankers Ramamurthy and Gaurav Wadhwani, Credit Sudhaar seeks to raise $25 million in series-B funding, which will enable it to build a loan book of up to Rs 1,000 crore. Credit Sudhaar enrolls those who have a low credit score as members and helps them improve profile.

"We do a psychometric credit profile of the person, and if we find that he is willing to repay, we provide a loan. This loan is either used for consumption or to consolidate earlier debt obligations," says Ramamurthy. If the borrower meets the repayment schedule, his credit profile automatically improves within a year.

According to Ramamurthy, there are many new-age lenders looking at the new-to-credit segment, but there aren't any lenders who are prepared to fund those who have been through a bad phase.