Why should credit bureaus become more borrower-friendly? Discover here

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After all, credit bureaus play an important role in dictating our financial lives, although many borrowers find this a very complicated, opaque and sometimes unfair part of their treatment as a borrower. Here we will highlight the key areas that need improvement and look at several reasons why the credit bureaus need to focus more on the borrower.

What are credit bureaus?

Credit bureau where an organization collects, stores and manages the credit information of individuals and businesses. Such data includes payment history, credit applications, public data on loans on credit accounts, credit cards and lines of credit.

In India, the four major credit bureaus are Equifax, Experian, CRIF High Mark and CIBIL (Credit Information Bureau India Limited). These agencies collect data from various sources to create credit reports and scores that can be distributed to borrowers and lenders, including banks, credit card companies and other financial institutions.

How do credit bureaus work?

1. Obtain credit information: Credit information is provided to credit bureaus by banks, NBFCs, credit card issuers and other financial institutions. These include those related to credit accounts, payments, defaults, bankruptcies and investigations.

2. Update credit information: New data, such as payments made or defaults incurred, or changes to a credit account, are often added to their databases.

3. Generate credit reports: Credit bureaus prepare comprehensive credit reports for an individual or business, allowing lenders to make informed decisions.

4. Credit score calculation: Credit bureaus would use the information collected to create a credit score, which is a shorthand measure of an individual’s repayment capacity.

How can credit bureaus become borrower-friendly?

1. Improve transparency: Often the borrower feels somewhat baffled as to how the credit scores are found for that particular person or even the reasoning behind the information that affects their creditworthiness.

2. Easy way to resolve disputes: Fraudulent credit reports are commonplace; however, solving them can be a lengthy and tedious process. Borrowers can simply erase errors if they can streamline the dispute resolution process.

3. Reduce the prejudice: The goal of credit bureaus should be to completely eradicate any systemic bias that could prevent a borrower from getting a fair deal.

In short, credit bureaus are gatekeepers to credit opportunities for debtors. Credit bureaus help better understand and manage credit through greater transparency, procedural efficiency and the removal of biases. Above all, a borrower-friendly system would make the financial system more inclusive and healthier for all people.

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