In the day and age that we live in, credit usage is omnipresent. While credit usage is on the rise, as is the awareness about credit bureaus and their importance, the rise in the number of complaints due to misreporting by lenders is also on the rise. While lenders are prompt to report a credit mistake on behalf of a borrower, they do not show the same urgency when it comes to reporting closure of loan account.
As a result, if the borrower does not check his CIBIL score periodically, he runs the risk of the ruining of his credit record. This, in turn, jeopardises his chances of getting a line of credit when he is in dire need of it. Often times, during the course of credit education, the onus is placed on the borrower. The credit user is told because of the “large amount of data” that lenders handle on a daily basis, such "errors and discrepancies" are commonplace.
In case such "errors" that are in reality the mistakes spotted by the borrower, the onus is once again on him to raise a dispute with CIBIL and wait for resolution. In the meanwhile, he has to bear the financial loss of raising a dispute, communicating with the concerned lender and take a knock on his credit score. This may even result in a notional loss as a line of credit that he may have applied may be rejected on account of a poor credit score. In case he is in dire need of credit, he is left with no other option but to check out options for loans for bad credit for no fault of his.
The lender, on the other hand, gets away with a mild apology, even if the borrower protests about incorrect reporting and stands nothing to lose while the economic consequences are borne by the borrower as pointed out earlier. The borrower is left hapless because Indian legislation, unlike the west does not have a "fair credit" reporting Act under which reporting lenders are subject to strict penalties in cases of proven irresponsibility. As a result, a borrower cannot take legal action against a lender in the present date, even if he can prove that he is not responsible for a poor CIBIL score.
In India, credit bureaus currently record information pertaining to credit usage of borrowers. In other words, your credit score is based on the number of loan accounts and credit cards you use and how your service your credit. However, with credit bureau activity in India increasingly getting in line with standard global practices, the day may not be far when insurance companies, telecom service providers too are made to report collection data to credit bureaus.
This means, your payment records of telecom services and premium payment to insurers will be reported to credit bureaus such as CIBIL. Thus, your score will be determined not only by your credit behaviour but will also by your general financial behaviour. As a result, any misreporting by any of the service providers too may jeopardise your credit score. A poor score may leave you helpless in the time of need, when you may be forced to access loans for bad credit.
At a time when winds of change are blowing thick and fast over the Indian financial landscape, where more people are coming into the formal lending system, time is ripe for Indian legislators to formulate fair credit legislations that will allow borrowers to ascribe responsibility to lenders in proven case of inaccurate reporting, and be compensated appropriately.