Check Your Free Credit Report before Applying for a Loan

If you are planning to apply for a home, car or personal loan, you must be aware that your credit score plays an important role during your loan sanction process. Hence, it is advised that you check your credit score before applying for loan and rectify any errors in the report through dispute resolution process.



How Do You Access Your Credit Score and Report?

Till December 31, 2016, if you wanted to access your credit report, you would have to pay for it. A credit report would have cost you around Rs 400-500. However, RBI, in its circular dated September 1, 2016 directed all the Credit Information Companies (CIC) to provide one credit report in a calendar year (January 1-December 31) free of cost. The circular is effective January 1, 2017.

There are many Credit Information companies in India. Most prominent ones are Credit  Information Bureau India Ltd (CIBIL), Equifax and Experian. You can approach any CIC to get your free full credit report (FFCR). 

Do note you get only one free credit report per calendar year. If you want to access credit report multiple times, you will have to pay.  As I understand, it is one free report per calendar year per CIC. Therefore, you can access one free report from each CIC in a year.

How Do I Access My Free Credit Report?

You can visit website of the CIC and follow the procedure provided to access free credit report. All the CICs have been asked to provide the procedure on their websites. The process to avail FFCR varies across CICs.

  1. CIBIL: You can access free credit score & report from CIBIL by filling the form here.
  2. Experian: If you want to access credit report from Experian, you can visit this link and follow the process.
  3. Equifax: You can go through the process outlined here.

What Will Be the Format of Such Free Full Credit Report (FFCR)?

RBI has asked CICs to provide such reports in digital format. Hence, you can expect such credit report to be accessible on their website or mobile app OR sent to you by e-mail. Many of you may wonder if the content of the free credit report will not be as elaborate. After all, it’s free. RBI has taken care of such worries. The RBI circular categorically states the following. The FFCR shall be in electronic format, and the procedure for accessing the FFCR shall be displayed on the CIC’s website. The content of the FFCR shall be the same as appearing in the most detailed version of the reports on the individual provided to credit institutions, including the credit score. Hence, be rest assured you are getting the full report free of cost.

How Do I Use Such Credit Report?

  • You know that banks access your credit report before offering you loans. A good credit score not only improve your chances of getting a loan, but you may also be able to negotiate a lower interest rate or get some discount in processing fee. 
  • What if the credit report does not reflect your credit status correctly? For instance, the credit report may show default on a credit card or loan that you closed many years back. Such items on your credit report will affect your credit score adversely. And you know that a poor credit score can affect your chances to get a loan. In such cases, you can raise a dispute with the CIC and ask them to make rectifications. This, to me, is the most important use of the free credit report. CIC will approach the concerned credit institution and ask it to review the case. You can also approach the credit institution directly to resolve the issue. As per Credit Information Companies Act of 2005, a credit information company (CIC) does not have any right to modify information in its database without confirmation from the concerned credit institution.  Any change has to be confirmed by the bank or any lending institution.
  • Additionally, if your credit score is poor (and accurate), you can take steps to improve your credit behavior. This should impact your credit score positively.

How Will CICs Make Money?

You might wonder how will CICs make money if they start providing free reports to borrowers. Firstly, you shouldn’t care. Let the CICs worry about it. But if you do, you are not the only ones who pay for credit reports. Banks pay too to download your credit reports. You can expect banks to pass this cost to you as an explicit or implicit component of processing fee. Moreover, just one credit report per calendar year is free. If you want another report, you will have to pay for it.

What Should You Do?

If you are planning to opt for a loan, a free credit report will let you know where you stand and if you need to improve your credit behavior or you need to get a few things rectified through dispute resolution (in case of errors in the report). Even if you are not planning to take a loan any time soon, it makes sense for you to check your credit score and rectify any errors through dispute resolution process. And you never know when you may need the credit report for reasons remotely linked to borrowing. For instance, I had to submit credit report to SEBI while applying for Registered Investment Adviser License. So, you never know. Make full use of the free full credit report facility.