Fee For A Credit Report Versus Free Credit Report: Part 2

Last week, we left a discussion incomplete – deliberately – so that all of us could deliberate.

Free credit report and score for each individual had been the topic of discussion. In developed credit reporting systems across the globe, there is often a legal requirement to provide a free copy, at least once a year, to the individual consumer. In some countries, even if there is no legal or regulatory requirement, there is a ‘good practice’ to provide a free report and score to every individual, at least once a year.

But right now, there is no free report and/or score available to individuals in India. In fact, the cost of a report and score is about Rs 470 or so, depending on which credit bureau you access).

Incidentally, the Reserve Bank of India (RBI) constituted a committee under Aditya Puri to look at various issues regarding credit information and one of its recommendations is that every borrower should have access to one free report per year. This recommendation has not been accepted yet by the RBI and may not be welcomed by the credit bureaus. After all, it will be a huge loss of income for them.

In addition to accepting the recommendation of the Aditya Puri Committee about providing a free report once a year to every individual, here are 5 more ‘individual friendly’ possibilities that the RBI can consider:

· A credit score to be given free of charge along with the free report.
· Every time a lending institution makes an error in reporting someone’s data or a bureau makes an error in de-duping and data matching, the bureau should make available another free report showing the corrected information, how the data reflects on the report and also its impact on the score.
· When a credit application is rejected by a lender for reasons attributed to a credit report or score, the lender should mandatorily provide a free copy to the individual. This is already required under the law, but not universally practised.
· The price of a credit report and score (after the first one, which should be free) should be significantly lower than the current price (currently, around Rs 140 is charged for a report and Rs 470 for a report and score). Banks and other lenders are paying significantly lower and there is no reason why an individual should be required to pay such a high price. The law (CICRA) read with the Rules and Regulations says, “...not exceeding Rs 100.” So there is nothing to stop a lower price.
· Every time there is an activity on an individual’s credit report, he/she should get an alert – that will be more proactive than asking an individual to keep on checking the credit score and will also help curb and reduce identity thefts.

Primarily, the credit bureau’s role is to provide a supporting system to improve the overall credit environment in the country. And what better way to start it than to encourage individuals to be aware – instead of asking them to pay?

About the author: Satish Mehta is the Founder and Director of Credexpert, a credit and debt counselling company in India.