CIBIL's Lack of Transparency Raises Concerns

A person's CIBIL credit score is a crucial factor in securing loans and credit cards in India. However, many people don't understand how CIBIL works, leading to questions about its transparency and accountability. Critics argue that this lack of clarity leaves borrowers vulnerable.

CIBIL is operated by TransUnion CIBIL Ltd., a private credit bureau regulated by the Reserve Bank of India (RBI). It collects monthly borrower data from banks, NBFCs, and credit card companies to generate credit scores. But recent reports of delays in updating records have caused significant problems for borrowers, leading to loan denials and issues with disbursements.

This issue has even reached Parliament, where MP Karti P. Chidambaram called for greater accountability from CIBIL. He highlighted that despite the score's importance for loans, the company's operations are opaque, and there is no effective appeal mechanism for borrowers. He pointed out specific issues, such as delays in updating records for farmers who have repaid loans using subsidies or settled with Asset Reconstruction Companies (ARCs).

CIBIL is one of four major credit bureaus in India, along with Equifax, Experian, and CRIF High Mark. While all are regulated by the RBI, their exact scoring algorithms are proprietary secrets. Borrowers only receive general guidelines—like payment history and credit utilization—without knowing how much weight each factor holds.

Errors in reporting are not uncommon. A single missed update or mislinked account can significantly damage a score. While borrowers can file a dispute, it can take up to 30 days to resolve, during which time the entry is marked "Under Dispute."

Experts warn that seemingly small mistakes, such as irregular EMI payments, over-utilizing credit limits, applying for too many loans at once, or only making minimum payments on credit cards, can all hurt a score. A strong score (750+) leads to better loan approvals and lower interest rates, while a weak one does the opposite.

This debate highlights a paradox: the CIBIL score is a powerful tool that shapes financial futures, yet the system that generates it remains largely a mystery to the people it rates. While regulators maintain that the system follows global standards, borrowers are demanding more transparency and a better way to address their grievances.