The credit bureau calculates the latest credit score and shares the applicant’s complete credit history with the lender so that they can assess the risk of credit of approving the applicant’s application.
Published Date – 24 April 2025, 06:36 PM
Credit score is required when you need a loan or credit card. When you fill the loan application, the lending bank sends a request to a credit bureau like CIBIL, Experian, Equifax and CRIF High Mark, for the credit score of the applicant. The credit bureau calculates the latest credit score and shares the applicant’s complete credit history with the lender so that they can assess the risk of credit of approving the applicant’s application.
If the credit score is low, it means that the applicant has not been diligent in repaying credit in the past and can be a risky customer. However, if the applicant has performed well with credit in the past, he will have a very good credit score. Depending on this information, such a borrower poses a less risk of default and thus gets a loan approved weithout much difficulty.
However, the scenario becomes tricky if the borrower’s data is not refreshed at regular intervals or data provided is inaccurate. This data is reported by all banks, credit card providers and NBFCs to all credit bureaus on regular intervals.
With misreporting or inaccurate information, the credit bureau will not be able to generate the correct credit score, which may make it difficult for the applicant to get the loan approved and also leave the lenders with fewer borrowing prospects. Thus, to make things streamlined and improve the effectiveness of the system, RBI has introduced some latest reforms that shall not only improve the quality of credit scores but also make it more reliable.
Let us find out some of the most important reforms introduced by RBI in recent times.
- Credit score to be updated every 15 days
All banks, NBFCs and credit card providers shared the credit information of all borrowers to all credit bureaus every 30 to 45 days. Depending on the information received, credit bureaus calculated the credit score for each borrower. This latest report would then help lenders assess the risk of lending to the applicant.
Now, all lenders have to share the latest information about all borrowers every 15 days. This shall help in updating credit behaviour in near real-time.
However, if the score was low and the borrower was working on improving the credit score, it took a lot of time to update the credit report and show positive influence. But now, this shall help them improve score quickly.
- Loan Rejection Reason
The lender will have to provide the reason for loan rejection to all applicants. They now cannot mention that the loan was rejected because the applicant did not fulfill the bank’s internal criteria. The lender will have to mention the specific grounds on which the rejection was done.
- Resolution of Grievances within 30 days
All grievances raised by a borrower will have to be resolved within 30 days by the credit bureau. For this, the lending institution is given 21 days to provided the required information, failing which the lender will be fined Rs. 100 per delayed day. In the next 9 days, the credit bureau has to update the credit report based on the input provided. If the lender provides the information within the timeframe and the bureau delays the updated score generation, the credit bureau will be liable to pay the fine of Rs. 100 per delayed day.
These directions are given to lenders and credit bureaus by RBI to streamline information and improve accuracy. It is recommended that users check their credit score from time to time and stay updated with any change in their credit report. It will help them take corrective measures accordingly and rebuild the credit score if it was low. A good credit score will help them get loans and credit card applications approved without much difficulty when it is actually required.