The untold and imperious saga of the credit bureaus, which control the all-important credit score, casts a long shadow over every individual in the financial landscape. Credit rating agencies hold immense power as gatekeepers to financial opportunities.
They collect and process vast amounts of personal financial data to generate a three-digit number — the credit score — which significantly influences an individual’s access to loans, credit cards, mortgages, and financial services. In India, these scores are not merely numbers; they are decisive factors in determining whether banks and financial institutions will extend credit, and under what terms.
As the financial backbone for millions, these agencies shape the economic futures of consumers, yet their opaque and often unchecked practices have sparked serious concerns about fairness, accuracy, and accountability.
In India, there are four major credit bureaus: CIBIL (TransUnion), Experian, Equifax, and CRIF HighMark. Among them, CIBIL is by far the most widely accepted by Indian financial institutions, significantly influencing individuals’ ability to secure loans. CIBIL (TransUnion) is a Chicago-based credit bureau company, which was formerly a domestic entity named CIBIL. It entered into a partnership with TransUnion in 2003. Over the years, TransUnion gradually increased its stake in CIBIL, ultimately acquiring a majority ownership of 92.1 per cent by 2017. The company has profited immensely from its role in India, with the country becoming its second-largest market by revenue. Similarly, Experian plc, a multinational data analytics company based in Ireland, and Equifax, a credit reporting agency headquartered in Georgia, USA, hold significant influence over India’s financial system; rating everyone.
However, the growing reliance on credit scores generated by these bureaus to determine creditworthiness raises serious concerns. The credit scoring system remains opaque, inconsistent, and prone to errors, all of which contribute to growing concerns about fairness. These bureaus control vast amounts of sensitive financial data on millions of Indian citizens. As of 2019, for example, TransUnion CIBIL had access to critical non-credit data sources, including the national voter registry (containing nearly 790 million records), property registries, and tax records. This data is leveraged to produce credit scores, but CIBIL’s control over such sensitive information raises significant concerns about privacy, security, and data sovereignty.
This situation raises a critical question: Why should a foreign private entity control the financial destinies of millions of Indian citizens? And why does the public not have greater transparency regarding how this vast data is collected, processed, and used to make such critical financial decisions?
Lenders, bureaus, and the unseen nexus
In today’s world, a credit score is a key gateway to accessing financial services, as it directly influences an individual’s ability to pursue their aspirations. For many middle-class individuals, having a good credit rating from the outset of their financial journey is crucial. It enables access to education loans, personal loans, gold loans, car loans, and home loans, all of which play a pivotal role in helping them achieve their aspiration. However, despite its importance, the credit rating system is deeply flawed and authoritarian, leaving the average person unable to trust the system. I recently raised the issue of credit rating agencies during the ongoing parliamentary session, highlighting concerns that have long been overlooked.
My X feed is filled with the genuine grievances and frustrations that countless individuals have experienced. The proprietary algorithms that determine an individual’s credit score are not disclosed to the public, leaving borrowers unaware of how their scores are calculated. This opacity becomes problematic when factors beyond a borrower’s control—such as delayed updates from banks, technical errors, or defaults on closed accounts—negatively affect the score. Another major issue is inaccurate reporting and data discrepancies.
For example, one individual reported that even after closing their credit card with a bank, CIBIL continued to damage their credit score for an unpaid annual fee. Unfortunately, there is no clear mechanism for individuals to challenge or correct such discrepancies. One individual, whose CIBIL score was 700, needed to buy a car just after the Covid-19 pandemic. When he approached a public sector bank (PSU), he was told that, due to his “low” CIBIL score, he would not be approved for a loan. Ultimately, a broker took him to a private bank, which approved the loan at an interest rate of 13.2 percent which is 6 per cent above the RBI-benchmarked Marginal Cost of Funds-based Lending Rate (MCLR). A lower CIBIL score enables banks and financial institutions to charge higher interest rates, creating an incentive to offer loans at inflated rates. This raises questions about how closely credit rating agencies, banks, and NBFCs (Non-Banking Financial Companies) work together, indicating a concerning nexus between financial institutions and credit bureaus. Another individual, who had missed a few EMIs on a loan from a digital NBFC due to Covid-19, but repaid it fully after a few months, found that his CIBIL report had labelled the loan as “written off”. Another user wrote to CIBIL on X on 1 June: “Without any reason, you have decreased my CIBIL score from 783 to 702. It took me over a year to reach this score. Please correct this, or I will have no choice but to commit suicide.”
Similarly, loan settlements with Asset Reconstruction Companies (ARCs) are often not updated in the system, resulting in outdated and inaccurate credit scores that hinder borrowers’ ability to secure new credit or obtain favourable interest rates. The flaws in India’s credit scoring system disproportionately affect vulnerable and marginalised groups, such as farmers, low-income individuals, and those without access to formal financial records. For instance, many farmers suffer damage to their credit scores because government subsidies or loan waivers are not recognised as valid repayments.
Another major concern is that all credit rating bureaus are private entities performing a public function— determining access to financial services for millions of people in India—without adequate grievance redressal mechanisms. Given the magnitude of the task at hand, it is questionable whether a private company should be entrusted with such a significant role without independent oversight. Such an important function should either be handled by a public entity or, at the very least, there should be a public institution overseeing their reliability, transparency, and regulatory aspects.
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Financial justice
The current credit rating system in India exacerbates an asymmetric relationship between ordinary consumers and credit bureaus. This imbalance, fueled by opaque practices and a lack of accountability, undermines trust in the financial system and perpetuates inequities. Instead of promoting financial inclusion, the system promotes financial exclusion, subjecting individuals to inflated interest rates, inaccurate scores, and a lack of recourse for correcting errors.
To resolve these systemic issues, urgent reforms are needed that prioritise fairness for the citizens. Strengthening oversight, improving dispute resolution processes, and establishing an easily accessible, swift and prompt grievance redressal mechanism are urgent needs. Ensuring greater regulatory control over credit bureaus will help rebalance the asymmetric relationship between consumers and corporate giants. Ultimately, the goal should be to create a financial system that values the dignity and well-being of all citizens, fostering trust and financial empowerment, rather than perpetuating an exploitative status quo.
Karti P Chidambaram is a Member of Parliament for Sivaganga, and a Member of the All India Congress Committee. He is also the Vice President of the Tamil Nadu Tennis Association. His X handle is @KartiPC. Views are personal.
(Edited by Theres Sudeep)