Many often confuse credit rating agencies with credit bureaus, but these entities serve distinct purposes. Here’s a breakdown of how they differ:
Credit Rating Agencies
Credit rating agencies evaluate the creditworthiness of business entities, including sole proprietorships and both public and private companies. Regulated by the Securities and Exchange Board of India (SEBI), these agencies analyze a company’s financial health—such as its sales figures, debts, and profits—to assign a credit rating. Lenders rely on these ratings to assess the risks associated with lending to these businesses.
Prominent Credit Rating Agencies in India:
- ACUITE Ratings & Research Limited
- Brickwork Ratings India Private Limited
- CARE Ratings Limited
- CRISIL Ratings Limited
- ICRA Limited
- India Ratings and Research Pvt. Ltd. (formerly Fitch Ratings India Pvt. Ltd.)
- Infomerics Valuation and Rating Pvt. Ltd.
Credit Bureaus
In contrast, credit bureaus focus on assessing individuals’ creditworthiness. They collect data such as repayment history, credit utilization, and outstanding debts to create credit reports and assign credit scores. These scores help financial institutions decide whether to approve a person’s credit application.
Major Credit Bureaus in India:
- TransUnion CIBIL
- Experian
- Equifax
- CRIF High Mark
Key Differences:
- Purpose: Credit rating agencies focus on businesses, while credit bureaus evaluate individuals.
- Regulation: SEBI regulates credit rating agencies, whereas the Reserve Bank of India (RBI) oversees credit bureaus.
- Data: Rating agencies rely on business financials, while credit bureaus focus on personal credit histories and financial behavior.
By recognizing these differences, lenders and borrowers alike can better understand the roles these institutions play in assessing credit risk.
Read : Credit Bureaus in India
