I found out that all Indian banks share information of their customer's credit accounts to an organisation called CIBIL, which stores and analyses this report and generates a score. It is modelled on the American TransUnion score and TransUnion International Inc is one of its stakeholder. But there are lot of differences between the way American and Indian credit rating and score works. This differences are created in such a way, that only the banks and financial institutions stands gainer.
In the US every consumer is entitled for one free copy of credit report every year, but in India this is not the case. In India to get the credit score every consumer have to pay a hefty sum.
Then comes part of inaccurate reporting, if a bank or lending institution generates a inaccurate report, then the onus of correcting the report falls on the consumer and not on the bank. The consumer has to take the responsibility of proving that it isa wrong report. In the meantime if any credit application gets rejected for this inaccurate data, the bank who provided this wrong information is not at all penalised, but by getting a rejected loan application the consumer gets penalised, and as per the institutions it is the consumers responsibility to rectify the wrong data reported by a bank.
Also in US the credit rating agencies only consider data of the last five years, but in India, the credit history is shown for a minimum period of 7 years and the maximum limit it not yet set.
Last and not the least, when a loan gets settled, in CIBIL the status is shown as settled. RBI initially wanted that a settled loan wont have a negative impact to the consumers, but all financial institutions successfully lobbied so that a "settled" loan will result in a negative rating and the overall score gets degraded. This scenario remains same even when a "No Due Certificate" is given on a settled loan
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