Credit Information Bureaus and Credit Rating Agencies in India

While Indian credit rating agencies (CRAs) evaluate the safety or risk of investment options offered by companies or institutions, credit information companies in India, commonly referred to as credit information bureaus (CIBs), generate credit scores and reports related to borrowers in the country. The latter evaluate borrowers' creditworthiness and debt repayment ability to help lenders assess risk better, while the former rate an organisation’s offerings to help investors.

The difference between these institutions lies in their meaning and functions. Here is what you need to know as both are important in terms of your finances, when it comes to applying for an instant personal loan and when it comes to making an investment.

Credit rating agencies in India

A credit rating agency rates various entities as borrowers based on their repayment ability using a range of metrics and factors. These entities exclude individuals, and the ratings take the form of letters such as AAA, CCC, and so on. Since the amount borrowed by organisations can run into lakhs and crores, those who invest in or lend to these organisations face a comparatively higher risk. Thus, with these credit ratings, investors, or lenders can make better decisions regarding organisational borrowers who may be:

• State governments
• Local governmental bodies
• Companies
• Special purpose entities
• Non-profit organisations

Additional Read: Improve your CIBIL Score

List of Credit Rating Agencies in India

• Credit Rating Information Services of India Limited (CRISIL)
• Investment Information and Credit Rating Agency of India Limited (ICRA)
• Credit Analysis & Research (CARE)
• Onida Individual Credit Rating Agency of India (ONICRA)
• Fitch India
• Brickwork Ratings (BWR)
• SME Rating Agency of India Limited (SMERA)

Here are the common functions of credit rating agencies in India:

• CRAs rate entities based on their ability to repay a loan or service their debt.
• CRAs rate financial products offered by financial institutions such as banks, public companies, NBFCs, microfinance institutions and mutual fund companies. They rate debt instruments and short-term investment instruments such as fixed deposits, bank loans, bonds, and hybrid capital instruments.
• CRA-approved credit ratings of investments help investors in making informed decisions.
• CRAs research the economy as a whole, including industries and companies and offer valuable analysis to their members.
• CRAs offer risk solutions and fund evaluation services to the mutual fund industry.
• CRAs provide policy and regulatory advice to leading organisations and the government.

Credit information bureaus in India

Unlike credit rating agencies, credit bureaus in India assign a credit score to individual borrowers like you, based on your creditworthiness and repayment behaviour. They generate a three-digit credit score and credit report after evaluating your credit history. This helps the lenders weed out undesirable loan applications that carry high risk. For instance, the Experian credit score in India is between 300 and 850 and the CIBIL Score range from 300 to 900. In both cases, the higher your score, the stronger is your financial profile.

List of credit information bureaus in India

• Experian
• Equifax
• TransUnion CIBIL

Additional Read: CIBIL Score calculation

Here are the common functions of credit information bureaus in India:

• CIBs maintain a repository of credit information of individual borrowers.
• CIBs offer members comprehensive risk management tools.
• CIBs provide lenders with portfolio reviews of borrowers that help them study a borrower’s credit behaviour and past or existing relationships with multiple lenders.

Apart from supporting lenders, credit information companies also help individual borrowers monitor their credit health. So, before you apply for a loan, especially an unsecured loan like a personal loan, check your credit score from CIBIL.

Additional Read: CIBIL report correction