DO you forget to pay your bills, often? Have there been instances when telephone bills have been paid well past the due date with a fine? Do you habitually ignore your insurance premium?
If your answer is yes to any of these questions, it's time for some reforms. These things will matter when you apply for a loan in the future because, by 2010, a system would be in place whereby your credit report would also include details about your bill payments.
What's more, by 2010 banks will have to provide their customers with a credit report when they demand for it. Currently, if a bank rejects your loan, you would have to approach Credit Information Bureau (India) Limited (CIBIL) to find out the reasons. By 2010, your bank will be in a position to give you the reasons and your full credit report as well.
These changes were prompted due to a recent move by the Reserve Bank of India (RBI) to grant an approval for the registration of CIBIL and a few other credit agencies namely, Equifax, Experian and Highmark under Credit Information Companies (Regulation) Act (CIC Act).
Also read: How to solve your credit card complaints
How can you use the credit report effectively?
There are several advantages to the enhancements set to happen with the existing credit information system. Here are a few of them.
1. Prevents Identity theft
You can keep track of your credit report to protect your identity and ensure your credit card or bank account is not being misused. If you notice something amiss, you can take immediate corrective action before it becomes too late.
2. Comprehensive credit reports and better money management!
You can assess your networth and existing debt liabilities before you opt for a new loan. This could put your financial situation in perspective once a summary of your credit repayment is available in a single log with a score spanning 300-900 points providing a measure of your creditworthiness.
You can also periodically track all your money inflow and outflow. This will help you approach your finances methodically, and will eventually serve as a financial goal map if you wish to improve your credit score.
3. Better interest rates possible?!
Access to credit reports is a welcome relief for loan applicants. If you have a good repayment record and an excellent credit score, your chances of bargaining for a better interest rate is a viable option.
4. More credit agency options
Now that they are more credit agencies to choose from; better systems that weed out errors and streamline the existing information systems will be given high priority.
5. Knowledge is power
Those of you who were informed by your banks that CIBIL reports were the reason for your loans getting rejected -- can request for the control number of your credit report from your bank and approach CIBIL for a clarification. This can be a complicated process, especially if the bank does not provide a valid reason for rejecting your loan. With direct access to your credit reports, you can now be assured of transparency.
Flip side
Credit information is a very sensitive issue. If they fall into wrong hands, it could prove to be dangerous. However, in light of such developments, could breach of privacy be one of they key issues we would need to battle in the future? These are some questions that only time will tell.
Illustration: Vaibhav Shirke
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Abitha Deepak is Head of Content & Research at BankBazaar.com - An online marketplace where you can instantly get loan rate quotes, compare and apply online for all your personal loan, home loan and credit card needs from India's leading banks and NBFCs.
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