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Credit Report: Insurance, Telecom and Utilities, tying it all together

Thursday, August 09, 2012 by Rajiv Raj

cb104n4On the face of it, there is no apparent connection between your credit report, your insurance premium, and your mobile phone and electricity bills. But one decision by the Reserve Bank of India could tie all of these different entities together.

In January 2012, CIBIL managing director Arun Thukral said that the credit bureau is talking to insurance and telecom companies about incorporating a consumer's premium payment records and telephone payments into the consumer's credit report. It seems like telecom companies are interested in this deal and all that remains is a clearance from the RBI. The RBI has this proposal for some time now and still hasn't given its decision.

Let's check out how telephone bills and insurance payments can influence your credit report. A lot of people in India who apply for loans often are first-time applicants with no credit history. This means it is difficult for lenders to judge an individual's credit risk. However, most individuals, the minute they start working often buy insurance. If an individual pays his insurance premium regularly it shows that he is a disciplined person and has good finance habits.

Similarly, if a person has car insurance and hasn't made too many claims (less than one claim every two years) it shows that he is a responsible individual who drives carefully and is not rash. Lenders assume that he is a good credit risk. The same is the case with telephone bills. Regular payments of your post-paid bills could convince the banks that you are a good bet to take.

The Credit Information Companies Regulation Act (CICRA) 2005, allows insurance and telephone companies to make use of a consumer's credit report. This means insurance and telephone companies can ask for a copy of your credit report before deciding to give you a post paid connection. However, your mobile phone payment history is not yet a part of your credit report. If the RBI gives its nod, it could soon start contributing to your credit history.

One reason why the RBI still hasn't given its nod is because the telecom industry hasn't gotten its act together when it comes to a consumer grievance redressal mechanism. There are too many inaccuracies in telephone bills and everyday there are consumer complaints on how the companies refuse to listen to their problems. The onus is on the telecom companies now. As for the consumer, you better start paying all your bills and premiums on time!

MadanRajiv Raj

Rajiv is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India’s first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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