According to a report, credit score stats indicate that around 220 million individuals in the country are creditworthy. An individual’s credit reliability is determined using credit ratings from various agencies in India, which monitor a borrower’s repayment history for his/her debts and other financial habits. An individual is deemed worthy of availing credit when he/she carries a history of timely repayments, without any delinquencies.
As such rating impacts one’s chances to avail loans and advances, potential borrowers should know more about credit rating agencies in India and the effect of such ratings on their loan applications. Before moving on to the various agencies, here’s a gist of what the institutions comprise and their credit-related functions.
What does a credit rating agency do?
Credit rating agencies assess an individual or entity’s creditworthiness. They study the lines of credit and income of a borrower to determine whether a debtor is capable of repaying additional loans availed in the future. Lenders can gauge the risk factor linked to a particular loan applicant by studying these credit ratings in detail. Under the SEBI Act, 1992, the Securities and Exchange Board of India is authorized to regulate all credit rating agencies in India.
Now that you know the meaning of credit rating agencies, you must learn more regarding the various authorized agencies operating within the country.
Different credit rating agencies in India
Set up in 1987, Credit Rating Information Services of India Limited is the oldest credit rating agency operating in India. Today, it maintains a presence in the USA, Hong Kong, UK, Argentina, China, and Poland. The agency’s registered offices are located in Mumbai.
The Investment Information and Credit Rating Agency (ICRA) is a joint venture between the Indian Financial and Banking Service Organisation and Moody’s. This agency was established in 1991 and is headquartered in New Delhi.
India Ratings and Research Pvt. Ltd.
A subsidiary of Fitch Group, India Ratings and Research Pvt. Ltd. covers urban local bodies, financial institutions, corporate issuers, project finance companies, and more. The agency’s headquarters are in Mumbai, but its offices are spread throughout the country.
SMERA Ratings Limited
SMERA is solely responsible for assessing the creditworthiness of micro, small, and medium enterprises (MSME). A positive SMERA report can help these smaller enterprises to avail reliable credit faster and more conveniently.
Also known as Credit Analysis and Research Limited, CARE was established in 1993. Reports from this agency help investors gauge the risk of investment in a particular venture. The company’s head offices are located in Mumbai.
Brickwork Ratings India Pvt. Ltd.
The last of the credit rating agencies in India, Brickwork Ratings has received accreditation from MFI and NABARD. Additionally, the same has also acquired NGO grading. Its head office is located in Bengaluru.
When a borrower applies for a personal loan online, the concerned financial institution may acquire his/her credit reports from one of the agencies mentioned above.
The distinction between credit rating agencies and credit information companies
Credit Information Bureau (India) Limited or CIBIL is one of the leading credit information companies (CIC) in the country. However, it is not the same as credit rating agencies. For one, the information from CICs is available to individuals, i.e., borrowers. However, credit rating agencies offer information to lending institutions only. However, potential borrowers can check the CIBIL score for a personal loan before submitting applications from the institution.
Apart from CIBIL, Experian credit score India is another source for individuals to learn about credit scores. Most lenders seek scores above 700 on a scale of 300 to 900 to ascertain creditworthiness.
Keep in mind that a good credit score can help you get better terms on your personal loan. Therefore, one should try to undertake measures that help improve credit score before availing of credits, especially unsecured loans.
When considering the CIBIL score, NBFCs often seek applicants with scores over 750 for personal loans. Repaying existing dues in time is one of the prominent ways that would help build these scores over time.
Institutions such as Bajaj Finserv also provide pre-approved offers to simplify and accelerate loan applications. These offers are available on credits, such as personal loans, business loans, and more. You can check your pre-approved offer by submitting your phone number and full name.
Handling debt responsibly should help you maintain an impressive credit rating. Regardless of the agency reporting your creditworthiness, lower scores can lead to loan rejections. It is thus advisable to always remain wary of whether you follow a suitable credit discipline when availing loans and advances.
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