In India, the three-digit CIBIL score has become a powerful gatekeeper for personal finance decisions. Whether an individual wants to purchase a car through a loan, secure housing finance, or even apply for a credit card, the number generated by TransUnion CIBIL can determine the outcome. Despite its far-reaching influence, however, most people remain unaware of how exactly CIBIL works, who controls it, or what mechanisms are in place to ensure fairness. The issue gained national attention recently when Member of Parliament Karti P. Chidambaram voiced concerns in Parliament about the opaque nature of CIBIL’s operations and the lack of transparency in how it manages credit data.
Chidambaram argued that CIBIL, though perceived as an authoritative financial institution, is in fact a private company, part of the global credit reporting firm TransUnion. He stressed that this company essentially rates every citizen based on their financial history, yet borrowers have little to no clarity on how their repayment records are updated or evaluated. He further highlighted that when repayment data is not reflected correctly—whether for farmers repaying loans through subsidies or borrowers reaching settlements with asset reconstruction companies (ARCs)—CIBIL often fails to update records in time. This, he said, creates a structural imbalance: individuals’ financial futures hinge on these scores, yet they have no effective way to challenge or appeal errors. His remarks underlined a sentiment shared by many borrowers—that there is a stark asymmetry between the power wielded by credit bureaus and the limited redressal available to consumers.
To understand the significance of these concerns, it is important to know what CIBIL is and how it functions. CIBIL, officially called TransUnion CIBIL, is one of the four licensed credit information companies in India, along with Equifax, Experian, and CRIF High Mark. These companies are privately operated but regulated by the Reserve Bank of India (RBI) under the Credit Information Companies (Regulation) Act, 2005. They collect and maintain detailed credit histories of millions of individuals and businesses, drawing data every month from banks, non-banking financial companies (NBFCs), and credit card issuers. Using this information, they generate credit scores that typically range between 300 and 900. Lenders use these scores as a quick reference to determine whether a borrower is trustworthy, how much credit to extend, and at what interest rate.
The importance of a credit score in the financial ecosystem cannot be overstated. A score of 750 or above is generally seen as a strong indicator of repayment discipline and increases the chances of quick loan approval at lower rates of interest. On the other hand, individuals with poor scores often face higher borrowing costs, smaller loan amounts, or outright rejection of their applications. This makes credit scores a decisive factor in shaping financial opportunities and access to capital for millions of Indians.
Yet, what remains opaque—and a source of ongoing criticism—is the methodology behind the calculation of these scores. While CIBIL provides general guidance on the factors that influence scores, such as repayment history, outstanding debt, type of credit, and duration of credit history, the company does not disclose the exact formula or weightage assigned to each factor. This “black box” approach leaves borrowers uncertain about how their financial behaviour translates into numbers, which can be frustrating when scores fall without a clear explanation. Industry experts argue that this opacity is intentional, as credit bureaus guard their proprietary algorithms. Nevertheless, the lack of transparency feeds into broader concerns, especially when errors occur.
Credit report errors are more common than most people realize. A missed update from a bank, incorrect account mapping, or even clerical mistakes can cause scores to drop significantly. Borrowers do have the option to raise disputes with CIBIL, and by regulation, the company must investigate and resolve such issues within 30 days. During this period, the disputed entry is marked as “Under Dispute” until corrections are verified and applied. However, many complain that the process is slow, bureaucratic, and still leaves too much control in the hands of the bureau, rather than the consumer.
Apart from systemic issues, financial habits also play a major role in weakening credit scores. Experts point out that irregular repayment of EMIs, using more than 30% of available credit limits, applying for multiple loans in quick succession, or relying only on minimum payments for credit card bills are common mistakes that erode creditworthiness. Even closing older accounts—despite having repaid them responsibly—can negatively impact credit history by shortening the borrower’s overall credit timeline. Advisors recommend that individuals consistently pay dues on time, keep credit utilisation low, and regularly monitor their credit reports for errors to maintain healthy scores.
The parliamentary debate has shed light on the dual reality of CIBIL. On one hand, it plays a pivotal role in shaping who gains access to financial products and under what terms, effectively controlling the credit landscape in India. On the other hand, its limited transparency and the absence of a strong redressal system leave borrowers feeling powerless. While the Reserve Bank of India regulates these bureaus and ensures compliance with data protection laws, the balance of power still rests heavily with private entities like CIBIL.
This tension between necessity and accountability forms the core of the debate. Credit scores are indispensable for modern financial systems, yet the lack of transparency in how they are calculated and corrected has raised valid concerns about fairness. Chidambaram’s intervention has sparked a much-needed discussion on whether India should demand greater openness from credit bureaus, stronger consumer rights, and a more robust grievance redressal mechanism—so that the system does not remain tilted against the very borrowers it is meant to assess.
