A credit score is more than just a number. It signifies the creditworthiness of a borrower and is of crucial importance for you to take out any kind of loan. Credit rating agencies assess you based on your borrowing history – they take your liabilities, assets, and repaying capacity into consideration. In doing so, they help lenders identify the potential risk involved in lending money to an individual. 

How do credit rating bureaus work?

In India, credit assessment bureaus allot credit scores to borrowers. The score is basically a three-digit number present on the individual’s credit report, which is generated after analysing their credit history.

With this score, lenders weed out high-risk loan applicants. The higher your credit score, the more creditworthy your financial profile is. This directly translates into higher personal loan eligibility, home loan eligibility, and so on.

Types of credit rating agencies in India

Credit Information Bureau India Limited (CIBIL)

Established in 2000, CIBIL has its headquarters in Mumbai. It is the first credit rating bureau in India and was founded by the Reserve Bank of India. Credit scores issued by CIBIL are used by leading financial institutions across India to sanction loans and fasten credit card approvals.

The scores assigned by CIBIL vary between 350 and 900. Any score above 700 is considered creditworthy, and lenders favour such borrowers. A high CIBIL credit score ensures that the borrower can quickly obtain approval for all personal loans and other loans at favourable interest rates.

Additional Read: All You Need to Know About CIBIL Score

Experian

Experian was established in 2006 and is recognised by the Securities and Exchange Board of India. Experian is known to prepare credit reports for both individuals and companies. It employs state-of-the-art technology to generate targeting and engagement reports, collection and money recovery reports, customer acquisition reports, along with other essential data and analytics.

Credit scores issued by Experian range anywhere between 300 and 850. 850 is the highest and naturally, the ideal credit score for an individual.

Equifax

Equifax was established in 1899, starting out as a retail credit company. Today, it is one of the three largest credit rating agencies in the world. Equifax provides individuals with risk scores, credit scores, portfolio scores, and much more. The scores range between 1 and 999. In addition, the agency also provides industry diagnosis, credit fraud reports, risk management reports, portfolio management and other services for businesses.

Additional Read:  CIBIL Score Myths Debunked

Summing up

While credit rating bureaus do not explicitly inform lending institutions whether they should extend credit to a particular applicant or not, they do provide detailed credit reports. Thus, for the borrower, these scores can make or break their loan application.

If you’re looking for easy borrowing solutions, come to Tata Capital for attractive interest rates, flexible terms of repayment, quick loan processing, and minimal documentation. If you want to understand your monthly repayments, use our personal loan EMI calculator available online.

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