Importance of Credit Reporting System

Access to finance is essential for economic growth and job creation. We cannot deny the fact that a well–functioning financial system offers a variety of products such as savings, credit and risk management etc to individuals as well as businesses. This not only works better for urban but for rural areas as well, they can also have better access to financial services which enables both urban and rural access to essential including savings, housing, health, education and agriculture etc.  The access to credit is largely hindered by the lack of sufficient information on the ability of potential borrowers to repay debt and the fact that, the basic approach of lending still remains traditional which is based on subjective judgments about a borrower’s ability to repay by collateral, or guarantee. Credit reporting is a vital part of a country’s financial infrastructure. When one can access financial resources easily, efficiently and reliably, the financial services become more accessible to more people. Monitoring and screening borrower’s need of credit along with habit of repayment offers one way to minimize problems of inadequate information. Thus, the credit reporting system is essential in order to facilitate access to financial services. Hence, the credit reporting systems should be safe, efficient, accurate and supportive of data subject and consumer rights. The credit reporting system is facilitating the lending process by providing lenders with objective information that enables them to reduce their risk and transaction costs along with helping them expand credit access to creditworthy borrowers.