What Do the Credit Bureaus Do?

Have you ever tried to find out your credit score? If yes, did you check your scores on different sites on the same day? If not, just try it once, and it is likely that you would experience something strange - you may get different scores on different websites.

Are you confused? Worry not. We are here to clear your confusion. Let's start off with the very concept of a credit score.

What Is a Credit Score?

A credit score is an indicator of an individual's financial stability. Whether you are applying for a loan or a credit card, this three-digit number carries a lot of significance. This numerical value is determined based on your financial (credit) history, and it depends on the following factors:

• History of debt repayments

• Total debt of the customer currently

• Credit available to him/her

A credit score ranges between 300 and 850 or 900. If you have a high credit score, you will find it easier to get loans approved. You may also get better interest rates on loans.

What Is a Good Credit Score?

Usually, if the score is more than 700, it is considered to be a  good credit score. The closer you are to the highest score (900), the higher the chance of approval for your loans. Given below are the industry-specific scores:

Poor - 300 to 579

Fair - 580 to 669

Good - 670 to 739

Very Good - 740 to 799

Excellent - 800 to 900

What is a Credit Bureau?

A credit bureau is a data analytics agency that researches and collects the credit history of an individual, generates the credit score, and sells it to banks, other financial institutions, and directly to customers as well.

Credit Bureaus use proprietary algorithms to calculate your score. Though this may vary marginally form one bureau to another, it is generally similar so as to maintain some semblance of uniformity.

How Do Credit Bureaus Get Your Information?

Aren't you intrigued about how these credit bureaus generate your credit score?

Financial institutions supply information about your credit dealings to credit bureaus. This information is in turn utilized to calculate a numerical score. Banks and other credit institutions regularly report to credit bureaus so that credit reports prepared for each individual is up to date.

Why Does Your Credit Score from Different Bureaus Vary?

Credit scores matter a lot to your financial well-being, especially while applying for credit cards or loans . There are a few reasons why your credit scores vary from bureau to bureau.

• Each bureau has its own algorithm to generate these scores.

• Lenders report credit information to the bureaus at different times, and hence, some financial information might not be updated with all bureaus simultaneously.

• A credit bureau may store or display the same information in different ways.

How Many Credit Bureaus Generate Credit Scores?

The following are the four most popular and best credit monitoring services in India:

• Equifax

• Experian

• TransUnion (CIBIL)

• CRIF Highmark

Equifax

Established in 1899, Equifax is the oldest of all the credit bureaus, and is  one of the largest credit bureaus in the USA. In India, it was licensed by the Reserve Bank of India (RBI) in 2010. The credit range is 300-900, 900 being the highest. A score of more than 700 is considered good.

The cost of the report is Rs.400 (excluding GST) for credit report and credit score. The credit score generated by Equifax is as good as the other bureaus. mymoneykarma provides you the Equifax credit score for free.

Experian

Headquartered in Dublin, Experian was established in 1996 and is a leading global information services company. RBI licensed it in 2010.

Experian initially offered a different score range but later on adopted the range of 300-900 as directed by the RBI. A credit score of 700 and above is considered good. The cost of the report is Rs.399 for credit report plus credit score.

TransUnion

TransUnion Limited was founded in the year 2000. It is India’s leading credit information company and is popularly known as CIBIL. The score ranges between 300-900. A good credit score would be 700 and above. The report costs about Rs.550 for credit report plus score.

CRIF Highmark

Highmark or High Mark Credit Information Services is another popular credit bureau in India that maintains record of every individual’s and organization’s credit information. Based in Mumbai, the Credit Information Company was founded in the year 2005.

Besides collecting credit information, it also offers credit reports and score to its members and individuals. It helps lenders and financial institutes gauge risk-profile of individuals and organizations before approving their loan applications.

The credit score ranges between 300-900. A good credit score would be 700 and above. The report costs about Rs.399 (including GST) for credit report + credit score.

All these credit bureaus provide online credit reports, delivering instantly once payment is made.

The Bottom Line

You may get different scores from different bureaus, but they all are based on the information provided by your creditors.

It is better to keep a check on your reports on a regular basis and improve your credit score.