Indians who would like to know their creditworthiness can now seek a free credit rating copy every year, according to a decision taken by Credit Information Bureau of India (CIBIL). The agency plans to provide a free credit report every year, waiving off the Rs. 550 fee charged for the service at present.
The credit report basically offers a onetime credit score or a rating on your capacity to service a loan if you seek for it at your present financial status. Most Indians, unaware of such a rating, are also obviously unmindful of discrepancies, if any, existing in such a report.
By the end of the year, reported Business Standard, CIBIL will offer one free credit report, "so that they can check their credit rating and petition if they see possible discrepancies," said Reserve Bank of India governor Raghuram Rajan.
"When an individual knows that a default will spoil their credit rating and cut off future access to credit, they have strong incentives to make timely payments," he added.
Speaking at a seminar on 'Transforming Rural India through Financial Inclusion', Rajan said that these agencies have helped solve the information and incentive problem that the retail credit sector suffered from. He added that such credit bureaus need to expand into rural areas and even bring the country's vast network of self help groups under its ambit.
Financial institutions, including banks, use these credit rating reports to check the creditworthiness of a person before granting a loan to him/her.