The previous version rated all borrowers with a credit history of less than six months at 0. The new version, christened Cibil TransUnion Score 2.0, will grade first-time borrowers on a risk index of 1 to 5-1 being the highest risk of default and 5 the lowest.
According to a report by ICRA, the Indian mortgage finance market, accounts for around 7% of GDP of the country. This has risen from around 2% as in March 2002 to a little over 7% now. This figure is however significantly lower than the penetration rates in developed countries (around 51% in the USA and 15-20% in South East Asia), and being so it appears to point to a significant scope for further growth in future.
Keeping the changing trends in mind CIBIL, India’s largest credit rating bureau has upgraded its scoring system to include several factors which were of lesser significance 5 years ago when CIBIL had developed their earlier scoring system. Here are some important things to know about CIBIL TransUnion Score 2.0.
Credit score has been designed keeping in mind the current trends and changes in the consumer profiles and credit data. The scoring for customers more than 6 months of credit history remains between 300 and 900 where higher the credit score the better.
Banks are switching to the new score. Your new score is likely to be lower than your old score since new evaluation parameters have been introduced. Banks are adjusting their decision parameters as per the new score hence it will not affect your borrowing capacity.
CIBIL TransUnion Score 2.0 has also provided for a risk index for people with less than 6 months of credit history. Those who earlier obtained a score value of ‘0’, owing to less than 6 months of credit history on their credit report will now have a score. They will be graded on a risk index ranging from 1 to 5, where 1 would mean highest risk and 5 would mean lowest risk of default.
The new scoring system will help banks evaluate new borrowers who were an unknown risk earlier. Also for older borrowers the decision making process has simplified since more parameters are included revealing further information about the borrower.
The CIBIL TransUnion Score 2.0 also introduces a risk index score range for those individuals who have a credit history of less than 6 months. These individuals were categorized under the category of “No History- NH” in the earlier version. The score range is from 1-5, with 1 signifying “high risk” and 5 signifying “low risk”.
Score 2.0 summary and interpretation:
Score & Index
Interpretation(i.e., for whom does this score reflect)
NA or NH
Individual has no credit history & it has not been reported to us.
Individual has no credit history but has only been enquired upon
Individual has credit history but none that is reported in the 24 months prior to enquiry.
Individual has a credit history but it has not been reported to us in the last 24 months.
Individual has a credit history which is less than 6 months, hence a risk Index is returned
Higher the index, lower the risk
An individual with a credit history of more than 6 months (in the last 24 months)
Higher the score, lower the risk