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Though you may receive numerous phone calls from telemarketers offering credit cards or personal loans, securing one isn’t easy.
For instance, if you are a small-time building contractor or a real estate agent, it is possible your application would be rejected. Harsh Roongta, chief executive of Apnapaisa, says: “It is not so black-and-white anymore. Earlier, professionals such as lawyers were also blacklisted. But today, if a lawyer has an excellent credit score, the bank might still approve the loan.”
Another parameter banks use for unsecured loans is the locality of residence. If you live in a minority-dominated area, your application might be rejected.
Credit reports are accessed by insurance and telecom companies, but these entities aren’t mandated to share data with credit information companies. “Telecom companies use credit report and credit scores to determine the credit limit for post-paid customers. If a customer has a good credit history, he/she would be given a higher credit limit,” says Harshala Chandorkar, senior vice-president (consumer relations), Credit Information Bureau (India) Ltd. Insurers use credit information to predict the likelihood of payments; updated contact information is used to contact and follow up with the customers for renewals of lapsing insurance policies.
Those new to credit should know besides banks, insurance and telecom companies, too, rely on this information. Also, your prospective employer might seek to see your credit report before offering you a job. The owner of a house you want to rent might also seek the same to ensure you would be regular with your payments. While these are common practices in countries such as the US, it is only a matter of time before these catch on in India as well, say experts.
Chandorkar says unlike in 2007-08, when banks were carrying out more surrogate lending (lending to customers of other banks), this time, they are looking at new cities and small towns. “We are seeing a lot of ‘new-to-credit’ customers this time. There are two-wheeler loans and unsecured loans,” she says.
Also, with the stigma attached with credit coming down through the years, not only youngsters, even the elderly are taking credit; many of them are ‘new to credit’. “A new borrower who builds a good credit report will not only find it easier to secure loans, but would also get competitive offers from other lenders,” said Jairam Sridharan, senior vice-president and head (consumer lending), Axis Bank.
A credit bureau report is also a good indicator of customer profiles and could help insurance companies offer the right product to the right customer, based on his/her profile, says Sanjay Patel, managing director and chief executive, Equifax Credit Information Services. This is because of the similarity in the pools of customers between retail banking and insurance.
