Customers with a clean loan-repayment record now have a chance to bargain for better rates when apply for a fresh loan, while those without a clean credit record would be in trouble as a low credit score would make new loans difficult and costlier.
The Credit Information Bureau (India) Limited (CIBIL) and the US-based TransUnion have launched the first generic credit score in India. Currently, only banks can access the credit history and individuals who want to use the score would have to wait until the Reserve Bank of India (RBI) comes out with guidelines.
A credit score in the range of 300 to 900 would be calculated for a customer based on his payment history, outstanding debt, credit account history, recent credit inquiries and make-up of credit use, explained Geoffery Miller, VP, international solutions and operations, TransUnion.
"Using this model one can assess the relative risk of the customer – it will predict the likelihood of a customer becoming a defaulter in more than 91 days or more lines of credit within the next one year," he said.
CIBIL chairman S Santhanakrishnan said data would be collected from 143 member institutions of CIBIL, which includes banks, housing finance companies and credit card companies. Banks and other lending institutions can use the credit score along with their internal assessments before granting loans to individuals.
Consumer credit has been growing at the rate of over 35 per cent for the past few years. The CIBIL score can help institutions increase market penetration with quicker access to data and reduce turnaround time, said Santhanakrishnan. CIBIL maintains a database of over 90 million trades, he added.