A consumer was denied home loan because CIBIL mixed up his credit history or record with someone else. Another was denied a loan due to gender mismatch. This could happen to you as well

Moneylife and Moneylife Foundation have been continuously raising question on the quality of credit reports and data in India. Here is a shocking case of Umesh Dhawan, who was denied a home loan of Rs5 lakh because his credit history or record data was mixed up with someone else, who was a defaulter. Mr Dhawan has been wrongly blaming ICICI Bank for the problem, while Credit Information Bureau (India) (CIBIL) was at fault.

CIBIL, the credit bureau while accepting its mistake in merging the credit record of Mr Dhawan with another person, has issued an apology and sent a fresh credit report to him, after a mail from Moneylife and strong intervention by ICICI Bank to which we forwarded the customer’s complaint. Even then, CIBIL provided ICICI Bank with an apology meant for the customer and not directly to Mr Dhawan. An explanation was forthcoming only when Moneylife wrote to CIBIL.

While Mr Dhawan’s record would be cleared, there may be several such cases where a person's credit record or data is mixed up with someone else. In a similar case, a senior financial consultant, DM Mahalaxmi also had to go through the same trauma. The question therefore is who will compensate for the loss of repute and trauma experienced by Mr Dhawan and Ms Mahalaxmi.

“Credit information submitted to CIBIL pertained to Umesh Uhawan who had taken a joint loan with Rahul Biswas. Since information pertaining to Umesh Uhawan and Umesh Dhawan were similar, the system matched the details pertaining to Umesh Uhawan with Umesh Dhawan,” CIBIL said in an email to Moneylife.

However, this raises bigger question on the credibility of credit bureaus, their data and ability to crunch the data. Matching data fields like name, date of birth, address, telephone numbers and identifiers like PAN, passport number and voter ID card is a challenge, especially in a country like India. However, over the years credit bureaus like CIBIL have developed an algorithm that is supposed to consider several fields before making a match.

When information in relation to a person whose credit information report (CIR) is to be obtained is fed into the system, a best possible CIR is generated based on the match rules with the available data. When sufficient data elements between two sets of personal data overlap, the information of two different accounts are merged in the CIR, CIBIL said.

In the case of Mr Dhawan, CIBIL said, “Based on the dispute raised by the consumer, we had done an in-depth analysis, it was observed based on the data submitted to us and our match riles, the CIR generated for the consumer had details of another individual mixed in the consumer’s report. We have immediately taken corrective action to separate the information.”

This is a verbatim of the reply received by Ms Mahalaxmi from CIBIL. There may be several such cases, but the credit bureau has refused to divulge the numbers. It said, "The rate at which incorrect merges occur at CIBIL is very low, and is competitive with bureaus of similar size and maturity globally.” Strangely, CIBIL is not answerable to the public as it continues to have a near monopoly on customer credit data or records.

CIBIL is also silent on the exact number of fields that are matched before deciding to merge data of two persons and creating a single CIR. “When enough data elements between two sets of personal data overlap, the information for the two subjects is merged together. The rules, which decide when enough data has overlapped to trigger a merge have evolved over the lifetime of CIBIL, based on annual analysis of the overall consumer dataset. In order to present the consolidated credit history of a person in a credit information report there are a few sets of match rules. The CIR is generated only when such rules are satisfied,” it said.

In the case of Mr Dhawan, were the fields like date of birth, address, PAN number, matched? Looks unlikely. This also means there is something wrong in the process itself.

Moneylife has been raising the issue of credit tracking system, which the above mentioned incidents show, is still in a mess and crippling financial life for no fault of the consumer.

According to sources, following the letter from Moneylife Foundation to Reserve Bank of India (RBI) governor D Subbarao on 13 December 2012, there has been quite some progress on the issues. The RBI has also set up a task force address some of the data parity problems between credit bureaus and lenders, the sources said.

Earlier, following the complaint letter, the RBI has asked banks and financial institutions (FIs) to share historical data with new credit bureaus, of which they had become members.

The financial literacy initiative of Moneylife Foundation, has led to the discovery that credit-tracking remains faulty in several ways. The Foundation also discovered that licensing of four credit bureaus without a level playing field, in terms of access to credit information and historical data, has created a system that is not functioning as it was supposed to.

Moneylife Foundation, through a day-long workshop and counselling on credit reports and issues and through few case studies, also discovered that most of the lenders only look at CIBIL data while others do not even bother to look at a credit report at all before making lending decisions.

There has been much discussion over the accuracy of the data in consumer reports. In general, industry participants maintain that the data in credit reports is very accurate. The credit bureaus point to their own study of 52 million credit reports to highlight that the data in reports is very accurate. The Consumer Data Industry Association testified before the US Congress that less than 2% of those reports that resulted in a consumer dispute had data deleted because it was in error. Nonetheless, there is widespread concern that information in credit reports is prone to error. Thus, the Congress has enacted a series of laws aimed to resolve both the errors and the perception of errors.

However, the goof up in the above mentioned two examples of Mr Dhawan and Ms Mahalaxmi, clearly highlights the need for audits and scrutiny of credit bureaus as well.

NOTE: If you are facing similar issue, you may want to get help from Moneylife Foundation's free Credit Helpline http://www.freecredithelp.in/