Want to get married? Pay your bills on time

A silent revolution is taking place in our lives and most people are still unaware of it.

Our bill payment habits are being tracked and the entire results are already available online at the click of button. The organisation that does this tracking is called a credit bureau.

So what are credit bureaus? How do they get information on our bill payment habits? What do they do with this information?

Credit bureaus are independent companies which collect the bill payment records of all the customers of various lending organisations like banks, credit card companies, housing finance companies as well as consumers of telecom companies (or consumers of any services which involve credit and/or periodic payments) and even keep track of any bankruptcy proceedings or alimony payments ordered by the courts.

All these records are stored in a common database and individual-wise files are prepared based on some common identifier between all records. Normally, there is an overriding common identifier (such as social security number in the US) but in India, the common identifier is still a permutation and combination of various numbers and data such as income tax returns, PAN No., passport no., Voter's ID No., name and date of birth, phone number, etc.

Whenever any authorized organisation (currently only banks are allowed to access these records from the bureau) asks for the records of a specific individual the possible matched records are provided.

Click here for a sample credit report. As you can see from it, the bank will be able to see all your past borrowings and the track record in terms of original loan amount, loan amount outstanding now, amounts due and paid (on time or after a delay) and the amount overdue in respect of each loan that you might have taken. The report lists all the addresses that you have provided to each of the earlier lenders.

This information is very valuable for the bank as it is able to obtain your existing debt and repayment history at the click of a button. It is also good for you (if you are among the 90% plus population who pay their bills on time) since you will be able to get a quick decision on your loan request and get a good interest rate as well.

Currently, the only functioning credit bureau (Credit Information Bureau of India Limited or CIBIL) is being run as a joint venture between the banks without any statutory backing. The Parliament has already passed a law in 2005 (called Credit Information Companies (Regulation) Act, 2005) and the rules required to make the Act effective are currently in the process of being finalised by RBI and are expected soon.

Once the Act takes effect, telecom companies, insurance companies etc will also be able to access your repayment track record. In fact, the credit Bureau will also be required to provide you with a copy of your own credit report. After some time, we may see rules that will allow the credit bureaus to collect information on bill payment habits from any service provider (Telecom companies, Insurance companies, landlords, professional services, etc.).

Most credit bureaus are likely to categorize your credit (as A, B, C or D much like credit rating agencies do for corporate borrowers) depending on the period for which you have had a credit history, your repayment track record, absence of any adverse judgments, period over which the repayments have to be made, etc. This will enable you to get more favorable terms if your repayment track record is good.

Thus, the objective third party credit information available from credit bureaus will enable the people with good repayment track records to stop subsidising the consumers with no or bad credit track record, who will have to pay a higher price for their past sins.

So what does all this have to do with your marriage?

Like in advanced economies, the influence of an effectively functioning credit bureau pervades all aspects of your life. Want to take a house on rent? The landlord will want to check out your credit report to judge whether you pay your bills on time. Want a job involving sensitive or valuable information?

The employer will want to check your credit report. In fact, the day will soon come when prospective in-laws would want to check out your credit report to check on whether your lifestyle is being fuelled by your income or by loans as also whether you pay your bills on time. Needless to add that some fancy explanations will be required if you are a habitual late payer of bills.

So remember to pay your telephone bill on time if you want to get married after a few years.