Keeping Score: Your credit record will be updated every fortnight, if not earlier

The availability of accurate credit information at shorter intervals is vital for both lenders and borrowers.

Effective January 1, 2025, banks and financial institutions will update your credit records more frequently. Reserve Bank of India  (RBI) Governor Shaktikanta Das proposed on August 8th that credit data should be updated every fortnight (i.e., on the 15th and the last day of the month), or at shorter intervals as mutually agreed upon between the credit institutions (CIs) and the credit information companies (CICs).

At present, CIs (lenders) are required to report credit information to CICs on a monthly basis, or at such shorter intervals as may be agreed between them.

What it means

The availability of accurate credit information at shorter intervals is vital for both lenders and borrowers. “Fresher credit information is better for banks and non-banking financial companies (NBFCs),” says Parijat Garg, a digital lending consultant.

“The data should be updated fortnightly or weekly. Else, in the age of pay-day, three-day, seven-day, 21-day loans, the credit score you see may not be a true representation of your financial behaviour today,” says Manish Jain, Country Managing Director of the credit bureau Experian India.

Satish Mehta, Founder of Athena CredXpert (ACX), an LLP specialising in credit counselling, says that the RBI diktat aligns with international standards of credit reporting, and may potentially lead to real-time data updates.

“Gradually, credit reporting should become daily or real-time, as that will make India's credit reporting infrastructure even more robust,” Garg adds.

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How frequently can credit scores change?

A borrower should be aware that a credit score is not a static number that someone computes every month, six months, or once a year. It is arrived at dynamically — when you make a request for your credit report or for the score, it is computed based on the data available at that point of time.

“Your credit score can change based on your credit behaviour vis a vis loans taken, loan repayment, loan defaults, or discrepancies across financial institutions,” explains Jain. Any change in any of these may lead to a change in the credit score.

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Benefits to borrowers and lenders

“More frequent updation is good for both the borrower as well as the lender,” says Adhil Shetty, CEO, Bankbazaar.com.

Borrowers will get to see the change in the status of their loans much sooner, which is very important when you make a prepayment or close your loan. Lenders will be able to assess risk  better and contain over-leveraging by borrowers.

Several borrowers have complained to credit bureaus about wrong credit data in their reports. “This shorter interval of credit reporting will help resolve consumer disputes faster,” says Rajesh Kumar, MD and CEO, TransUnion CIBIL, a credit bureau.

Also explore: Free credit report and regular credit score updates on the Moneycontrol app and website

How fortnightly credit reporting works for missed EMI payments

If a consumer misses an EMI today, it may reflect in the credit report (and therefore in the credit score) only after 60 days. However, with fortnightly reporting by lending institutions, this miss may reflect in the credit report perhaps after 30-45 days. “So, the credit score for a borrower who has missed an EMI would drop sooner than before,” says Garg.

“For customers who pay up on time, their data will also show up sooner, increasing the chance of improving their credit score and qualifying for loans they may have applied for,” says Mehta.

Also read | RBI policy: New UPI feature to authorise another user to transact from your account

Penal action in case of non-compliance 

Every March 31 and September 30, CICs are to share with the RBI's Department of Supervision the list of CIs not adhering to the guideline. CICs and CIs found to be non-compliant shall be liable for penal action, according to the RBI.