Monday 2 March 2015

Impact of Credit Scores on Your Life in future


Now it is clear that CIBIL Transunion Credit Score affects your ability to get loans and credit accounts. Most of us don't know that this Score is also going to be used in other areas of your life very soon in near future.

Mobile Companies

Smart Phones can be very expensive, and as a way of reducing the cost many mobile operators will provide discounts if you sign up for Postpaid connection. As part of this process, many mobile companies will first check your CIBIL Credit Score to determine whether or not you're likely to make all the payments on your postpaid account Agreement contract.

Utility Companies

Many people have learned the hard way that an unpaid Electricity Bill or Telephone Bill can show up on their credit report, but not many people know that it will become very soon a common practice for companies to check your credit score before turning on your Electricity or landline facility. If your credit score is too low, they may demand security deposit or advance fees, or a guarantor to ensure your bills are paid responsibly.
Property on Rent or Lease


It will be a common practice in future for landlords, licensors or owners of the premises to ask for your Credit Report and Score before handover the Commercial, Residential or Industrial properties on rent or lease. They will ensure that you have a strong payment history, and are a financially responsible person. If your credit score is too low, they might not rent you their properties


Credit Sudhaar, a non-specified user entity, is accessing confidential credit records from CIBIL while claiming to help individuals improve and maintain their credit health. Why is the financial regulator, RBI, silent?


Credit Sudhaar, a firm set up by former bankers Gaurav Wadhwani and Arun Ramamurthy, says it has a tie-up with CIBIL for offering credit advisory services and will help individuals in improving their credit health which will in turn enable customers to get better offers from lenders at the CIBIL Market Place. What it does not say is it is neither registered with the Reserve Bank of India (RBI) as a non-banking finance company (NBFC) nor it is a specified user entity of CIBIL but will access credit records of crores of individuals.

While there is no word from CIBIL on this strange partnership, what is surprising is how the credit bureau may have allowed a non-specified user entity to access its database. In a press release, Credit Sudhaar said it is associated with Dipran Finance Pvt Ltd. However, on its website it mentions affiliation with Safe Capital, an NBFC. In an email reply, the firm said, “Credit Sudhaar is associated with both Safe Capital and Dipran. Both Safe Capital and Dipran are members of CIBIL”.

Even on its website under the FAQ section, replying to a question “Are you approved by the RBI?” it says “Yes. We are affiliated with Safe Capital which is an approved institution as per RBI charter”.

Earlier, Credit Sudhaar used to mention itself as an NBFC registered with the RBI, which was changed later.

This also means, Credit Sudhaar may be using either Safe Capital or Dipran’s login credentials to access the CIBIL database, especially the portfolio review which gives complete details of an individual. Since Credit Sudhaar is not a specified member entity of CIBIL, this violates Section 22 of the Credit Information Companies (Regulation) Act, 2005 (CIRCA), which says..

22. Unauthorised access to credit information.—

(1) No person shall have access to credit information in the possession or control of a credit information company or a credit institution or a specified user unless the access is authorised by this Act or any other law for the time being in force or directed to do so by any court or tribunal and any such access to credit information without such authorisation or direction shall be considered as an unauthorised access to credit information.

In addition, the CIRCA clearly defines a specified user who can register with a credit bureau as member entity. Section 2 (l) states “specified user” means any credit institution, credit information company being a member under sub-section (3) of Section 15, and includes such other person or institution as may be specified by regulations made, from time to time, by the RBI for the purpose of obtaining credit information from a credit information company.

Besides credit institutions, insurance companies, telephone services providers, credit rating agencies registered with Securities and Exchange Board of India (SEBI), a stock broker or sub-broker registered with SEBI, a trading member of recognised commodity exchange, SEBI and Insurance Regulatory and Development Authority (IRDA) are regarded as specified users under Regulation 3 of the CIRCA.

Let’s put it in simple words. Credit Sudhaar is just a specific services provider. CIBIL is allowing credit institutions and others to sell their loan products or other services on its Market Place. Credit Sudhaar is only registered on Market Place to offer “credit advisory” service for which the charges are Rs10,000 (it is mentioned as processing fees).

Both Mr Wadhwani and Mr Ramamurthy, the promoters of Credit Sudhaar had worked with Standard Chartered Bank and Citi. Both were also directors of SHAHA Finlease Pvt Ltd, an NBFC formed to buy bad assets from StanChart. On several occasions, the RBI, StanChart and the banking ombudsman had reprimanded SHAHA Finlease for its unprofessional conduct and unruly collection agents. Even on the Internet, there are number of complaints against SHAHA Finlease.

Our mails to CIBIL and the RBI remained unanswered till writing the story. We would incorporate their replies as and when we receive it.

2 comments:

  1. Good blog!
    Thank you for sharing such a interesting blog and informative blog. I want to share some information on loans. Loans are extremely important when one wants to invest in good projects.To know more about loan related activities and to understand the procedure as well you can visit easyloansindia.

    ReplyDelete
  2. If you have never applied for credit and are not thinking about buying a car or getting a mortgage in the near future, you may think that a credit score cannot have an impact on your life. But, you would be wrong. Almost all companies now use a credit score to assess whether or not you are a good risk or a bad risk. This applies to mobile phone companies, car insurance companies and landlords who offer tenancies. Your credit score also makes a difference to whether you get offered a low rate of interest when you do apply or whether you will be asked to pay over the odds for a loan. So, having a good or bad credit score can impact all aspects of your life.

    Source: Foremost Credit Repair Program

    ReplyDelete