The Credit Information Companies Regulation Act (CICRA) permits institutions like banks, insurance companies, telecom companies, broking firms and asset reconstruction companies to access credit information companies’ database.
“If other regulators permit or make it mandatory to check credit history, it may be difficult to buy a motor or health policy. Or, you may have to pay higher premium. Similarly, telecom companies may take a decision on whether or not to grant a connection if the credit score is too low,” explains VN Kulkarni, chief credit counsellor with the Bank of India.
Sure, things are at a nascent stage to make a huge impact on your wallet immediately, still it pays to be prudent.
According to Credit Information Bureau (India), or CIBIL, telecom service providers have started using its credit score to make decisions on post-paid mobile phone limits. “When a consumer applies for a post-paid telephone facility, the service provider will pull out her or his credit score and credit history on the basis of the information provided in the application.
This information in the credit report and the score will enable the service provider to assess the consumer’s financial standing and assign an appropriate credit limit on the post-paid connection on the basis of their policies,” informs Harshala Chandorkar, senior vice-president , consumer relations, CIBIL.
If you are an aspiring investment advisor , you might need to watch your credit behaviour. “Sebi (or the Securities and Exchange Board of India) recently announced that investment advisors will need to have a good CIBIL credit report and satisfactory research capacity to get permission to provide advice to investors ,” says Chandorkar.
Therefore, ensure that you have a clean repayment record if you hope to secure Sebi’s approval for carrying out your advisory business. On the other hand, as a retail investor, you can draw comfort from this proposal. After all, a financially disciplined advisor is more likely to offer sound advice on investment decisions.
Credit information companies say that even general insurers have started accessing their credit history database. The usage is currently restricted to contacting policyholders who may have shifted residences for follow-ups or premium reminders . However, the scope could widen in future. As mentioned earlier , those with poor credit history may find it difficult to buy an insurance policy. It could also determine the premium you have to pay on motor or even health insurance policy – a practice that already exists in developed economies.
CONSUMER GOODS FINANCIERS
Consider this: you are out shopping in a mall, but can’t resist that LED TV in the shop next door. You do not have enough funds, but the salesperson offers an EMI scheme that enables you to pay in installments. Chances are that the credit facility will be extended to you instantly, if you have good credit record. “Now finance companies and banks also check creditworthiness of consumers who are seeking to buy televisions , computers and other electronic products on EMIs to provide them instant financing at the store itself,” informs Chandorkar.
MONITOR YOUR CREDIT BEHAVIOUR
These trends are an indication that your credit history will affect more than just your loan applications in the near future. In developed countries, credit scores are used extensively for other purposes as well. “Banks and insurance companies use credit score for risk based pricing i.e. consumers with higher scores gets mortgage loans at cheaper rates compared to consumers with lower credit score. The same applies for motor insurance premium in developed countries.
Organisations in India may follow suit. “We may see similar evolution in India when a person’s credit report and credit score will be imperative for a lot many things in addition to availing institutionalised credit facilities,” adds Chandorkar. On your part, you can maintain or improve your credit scores by making all repayments as per schedule to ensure that you are seen as a creditworthy individual.
“You should avail loan as per the repaying capacity . Secondly, pay your EMIs and credit card dues on due date without fail. Also, you should not avail too many personal loans and credit cards,” advises Kulkarni. Finally, make it a point to check your credit history at regular intervals to verify the accuracy of your records. If you notice any discrepancy, alert the lender and get the errors rectified.
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Courtesy : Economic Times