Consumer Credit Ratings Should NOT Get More Personal

In a recent op-ed entitled Credit Ratings Need To Get Personal in the Economic Times, the authors compare corporate credit rating and consumer credit rating and make the case for enriching consumer credit rating by pointing to the more-enriched composition of corporate credit rating.

In my opinion, this is a false equivalence for at least two reasons.

One, corporate credit rating happens only when the borrower is raising debt whereas consumer credit rating happens even when the consumer has not applied for a loan.

Two, corporate credit rating is initiated by the borrower whereas consumer credit rating happens behind the consumer's back.

Therefore, whatever information the corporate borrower submits for credit rating exercise has its tacit consent. But, as a consumer, I see no reason why I should allow everyone to know about my deposits and other assets, as this article is advocating, when I am not seeking a loan.

And, when I am seeking a loan, no bank gives a loan just on the basis of credit rating - they ask for income statement and tons of other data, so I don't agree with the claim made in the article that banks end up with delinquent outstandings / NPAs in consumer loans because of lack of information.

In short, the present consumer credit rating system is fair to all parties concerned, and I see NO case for it to get more personal.