Free Annual Multi-bureau Credit Report can Help Spot IdentityTheft: By NIKHIL WALAVALKAR MUMBAI - Economic Times: A good credit report and a good credit score is a must to get a loan from banks these days. When an individual applies for a loan, say a home loan, the bank pulls out his credit report from one of the credit bureaus such as Cibil, Equifax, Experian, HighMark, and if his credit score is below 750, banks may be sceptical about sanctioning his loan. What’s worse is that if there’s amention of a default on loan in the credit report, then banks may simply reject his application. For beginners, a credit report is a document that provides the borrower’s demographic information: name, gender, age, PAN, address and the details of credit against his name and more important, the repayment history. Credit score is a numerical presentation of the repayment history of a borrower and ranges between 300 and 900. It is a part of credit report. For most banks, 750 is a threshold, while CIBIL claims that 79% of all new loans sanctioned are to individuals with CIBIL score (credit score) above 750. Higher the number, better it is for the borrower. A credit report is prepared by credit bureaus by using the data shared by member institutions, banks and non-banking financial institutions. Each time a new loan enquiry is made or a new loan is sanctioned to an individual, it is captured by the credit bureau and reflects in the credit report, and also influences the credit score. So, it’s no more a rare instance to see a loan application being rejected on a poor credit score. Some of these applicants may be disciplined in their loan repayments, but their poor score may be attributed to identity theft, wrong records provided by the banking institutions, data transfer issues culminating in incorrect remarks. While data issues can be sorted out, identity theft is a big threat for most individuals. Identity theft means posing as someone to obtain credit in that person’s name. Fraudsters manage to access documents establishing identity and address of individuals and also income-related documents. Loans and credit cards are issued in the name of innocent individuals and fraudsters use that money and never pay back. Credit reports of such innocent individuals show a ‘default’ status against such loans. Worse, these individuals have no clue on what’s happening, and face a rude shock when they apply for a loan. For example, an individual agrees to buy a flat, pays 20% of the consideration, and goes to a bank for a home loan for the rest of the amount and realises that his application is rejected despite being a responsible credit user — all thanks to identity theft. Simply put, someone somewhere has raised a loan in his name and defaulted on it. The identity theft menace is expected to spread further. The only solution is perhaps to keep accessing one’s credit report at regular intervals. Credit reports capture loan enquiries made in an individual’s name as well as new loans disbursed. Most credit observers recommend accessing credit report at least once a year. This tells the individual if someone else is trying to raise loans in his name. Today, individuals have to pay for accessing their credit report. For example, Cibil charges . 470 to pull out a credit report of an individual. Also, to be doubly sure, one may have to go to each bureau and seek his credit report. To avoid these costs, in terms of money, effort and time, it is better to offer individuals one free multi-bureau credit report once in a year. This will make individuals aware of their credit health, and further help to initiate action if they have been victims of identity theft. This should also increase awareness among individuals and also help banks reduce their NPAs.
Posted on: Tue, 03 Dec 2013 05:13:30 +0000
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