Score Variance

Nithin Kamath, the founder of Zerodha, is worth $3.9 billion. In Indian rupee terms, that’s around ₹33,800 crore. And, yet, when it comes to getting a loan, he is merely in the ‘good’ category, whereas many Indians with a fraction of his net worth would be deemed ‘excellent’. This, we know, because of Kamath himself who put up a post on X stating that his credit rating is 747 while 750 is the cut-off for excellent.

Credit ratings are done by private entities that get infor­mation directly from financial institutions. It is an essential score that decides how easy it is for someone to get a loan. Even with 747, loans will not be difficult to get and Kamath is hardly looking for one, but his score tells you something about the parameters that make it up. If you, for example, have never taken a loan, then chances are you will not have an excellent score. Or, if you are absent­minded and disorgan­ised and paid your credit card bills after the due date a couple of times, then the score will drop.

You can look up your credit score from the agencies that cre­ate it and so do banks when anyone applies for loans. The number of times such enquiries for scores are made can lead to the score drop­ping. Then there are things that you don’t even have to be responsible for—like a bank making a small error while updating details about loan repayment.

On top of all this, the vast majority of Indians don’t know that such a score about them exists at all. If they have a low score which does not reflect their true financial position, they wouldn’t even know to rectify it.

An efficient system to rank people by the ability to repay would rank Kamath at the top. In a world where technology and computation systems are so advanced, it seems somewhat absurd that these scores are decided by such rudimentary metrics. The agencies getting paid very handsomely through the present system is one explana­tion for why it continues.

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