Faster Credit Score Updates: What the Biweekly Reporting Shift Means for You

"The fortnightly reporting frequency would ensure that credit information reports provided by CICs reflect more recent information. This will be beneficial to both borrowers and lenders (CIs). Borrowers will have the benefit of faster updation of information, especially when they have repaid the loans. Lenders will be able to make better risk assessments of borrowers and also reduce the risk of over-leveraging by borrowers," stated RBI Governor Shaktikanta Das on Thursday. These guidelines will come into effect on January 01, 2025.

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Before we go any deeper, first let's understand what credit score is;

A credit score is a three-digit number ranging from 300 to 900 that depicts an individual's loan repayment capacity. Out of many factors that banks and NBFCs consider while approving or rejecting your loan application, your credit score is the major factor since it gives lenders an idea about your creditworthiness. The higher the credit score, the more banks and NBFCs will be interested in granting you a loan because a higher score indicates a lower probability of a loan default. Therefore, a higher credit score is the key to loan approval, whereas a lower credit score reduces the chances of getting a loan.

The Credit Score Indicator below can help you understand the different ranges of credit scores:

Who Calculates the Credit Score?

In India, we have four credit bureaus that calculate credit scores:

- TransUnion CIBIL

- Equifax

- Experian

- CRIF High Mark

The primary purpose of these bureaus is to evaluate an individual or a business entity after collecting and analysing their respective credit data and repayment history. Banks and NBFCs across the country largely use the CIBIL score from TransUnion Credit Information Bureau (India) Limited (CIBIL).

Currently, lenders must report credit information to Credit Information Companies (CICs) on a monthly basis or at shorter intervals agreed upon between the lenders and CICs. The shift to a biweekly reporting schedule is anticipated to improve the accuracy and timeliness of credit information, thereby enhancing lenders' ability to make well-informed lending decisions.

RBI Governor Shaktikanta Das explained that borrowers will benefit from quicker updates to their credit information, particularly after loan repayments. At the same time, lenders will be able to assess borrower risk more precisely and reduce the risk of over-leveraging.

Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL stated, " With more frequent data reporting by banks and credit institutions, CICs will be able to update credit records faster, and this will translate into more updated data being available for making informed lending decisions by credit grantors,"

He also noted, "This will also aid in faster resolution of consumer disputes based on updated data in credit records."

"Credit information solutions help create economic opportunities for millions of people in India, and we take our responsibility to deliver accurate data very seriously. As India's pioneer credit information company, we work constantly to strengthen the credit information ecosystem for the public good.", he added.

The RBI has requested that CICs submit a list of credit institutions (CIs) that are failing to meet the biweekly data submission deadlines to the Department of Supervision at the RBI's Central Office. This report should be provided twice a year, as of March 31 and September 30, for monitoring and informational purposes.

The transition to biweekly credit reporting benefits both borrowers and lenders significantly. For borrowers, it means quicker updates to their credit reports, especially after loan repayments. This timely reflection of their improved credit status can enhance their credit score more rapidly, making them more attractive to potential lenders and improving their chances of securing favourable loan terms in the future.

Lenders gain from having more accurate and current credit information, allowing them to make better-informed decisions regarding lending. With up-to-date data, lenders can more effectively assess a borrower's creditworthiness and financial stability, thus reducing the risk of lending to over-leveraged individuals.

This frequent reporting will help in identifying and managing risk more proactively, leading to a more stable lending environment. Overall, the biweekly updates will enhance transparency and efficiency in the credit market, benefiting both parties by fostering more reliable and responsive credit assessments.

Here's how borrowers can leverage the biweekly credit reporting to boost their credit scores:

1. Timely Loan Repayments: Ensure that all loan repayments are made on time. With more frequent updates, prompt payments will be reflected sooner, positively impacting your credit score.

2. Reduce Credit Utilisation: Lower your credit card balances regularly. Frequent reporting means your lower credit utilisation will be updated more quickly, helping to improve your credit score.

3. Monitor Credit Reports: Regularly check your credit reports for accuracy. With updates occurring every two weeks, promptly address any discrepancies or errors to ensure your credit information remains accurate.

4. Manage Credit Accounts Effectively: Maintain a low balance on credit accounts and avoid missing payments. Frequent reporting can quickly reflect responsible credit behaviour, leading to a faster improvement in your score.

5. Increase Credit Limits: Request higher credit limits on your accounts. Higher limits with the same spending level can lower your credit utilisation ratio, which will be updated more often under the new reporting schedule.

6. Handle Credit Disputes Promptly: Address any credit disputes or issues quickly. The biweekly updates mean that resolved disputes will be reflected sooner, helping to restore your credit score faster.

[Click here to read the 8 Guaranteed Ways to Improve Your Credit Score]

To conclude:

The shift to biweekly credit reporting marks a significant improvement in the timeliness and accuracy of credit information. For borrowers, this means faster updates on their credit status, leading to quicker enhancements in their credit scores following timely repayments and responsible credit management.

Lenders benefit from more current data, enabling better risk assessment and reducing the likelihood of over-leveraging. Overall, this change fosters a more dynamic and transparent credit environment, enhancing financial decision-making for both parties and promoting healthier credit practices. The move underscores a commitment to improving financial systems and consumer credit health.

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Hiral Bhuta is a Investment Consultant & Principal Officer. She is a seasoned professional in the financial services industry, currently serving as an Investment Advisor and Financial Planner at PersonalFN. With her expertise, she plays a pivotal role as the Principal Officer appointed under SEBI's amended IA Regulation. Hiral holds distinguished certifications such as Certified Financial Planner (CFP) and NISM XA & XB, complemented by a post-graduate degree in commerce (M. Com). Her primary areas of focus encompass financial planning, investment advisory, and wealth management, where she leverages her knowledge and skills to provide tailored solutions to clients. With a cumulative experience spanning five years, Hiral brings a wealth of expertise and insight to her role at PersonalFN, ensuring clients receive expert guidance and support in navigating their financial goals.
 

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