Bindisha Sarang
letters@hindustantimes.com
A few days ago, Equifax Credit Information Services Ltd became the second credit bureau of India to offer a credit score or the “risk score”. Earlier, Credit Information Bureau (India) Ltd (Cibil) was the only bureau which provided credit scores, which it started in April.
A credit report is the record of an individual’s past and current borrowing and payment history. A credit score is based on the credit report, representing it in a numerical format.
“The risk score is designed to predict the likelihood of a customer defaulting over a 12-month period,” said Samir Bhatia, MD and CEO, Equifax. “An account is said to be a default when it crosses the 90-day mark of no payments.”
Equifax’s risk score
The risk score assigned to customers will be based on more than 600 variables such as past credit payment history, current credit activity, number of credit cards, number of loans and demographic variables such as address, income and the like. The score will vary between 1 and 999. The score is not only available for existing borrowers, but also for those who have never borrowed.
A single report along with the score will cost R400. However, if you would like to monitor it throughout the year, the bureau will give it to you four times a year for an annual fee of Rs 1,000.
Cibil’s credit score
The Cibil score is a three-digit number ranging between 300 and 900. Like the risk score, it helps in estimating the likelihood of loan repayments. A score closer to 900 indicates that a borrower is least likely to default. The credit report along with the score costs R450.
What two scores mean
The fact that there is more than one score works in your favour. “If scores from both the bureaus are high, it will work for consumers,” said VK Kulkarni of Abhay Credit Counselling. “If you have a high score, banks will want you as a borrower and processing time of the loan will be lower.”
It may be possible that you are a good borrower and still have a poor score from one rater due to reasons beyond your control. In such a case, a second score will help.
“When banks will pull out a second score and see a strong one, the consumer may benefit from it,” said Bhatia.
Also, having two good scores can help you bargain with the lender in the future. A low score will indicate a poor credit report which will help you detect any fraudulent activity that may have been carried out in your name. If you have not defaulted but receive a low score, you can get in touch with the credit bureau and/or the institution from where the loan was availed for further assistance.
What two scores mean
The fact that there is more than one score works in your favour. “If scores from both the bureaus are high, it will work for consumers,” said VK Kulkarni of Abhay Credit Counselling. “If you have a high score, banks will want you as a borrower and processing time of the loan will be lower.”
It may be possible that you are a good borrower and still have a poor score from one rater due to reasons beyond your control. In such a case, a second score will help.
“When banks will pull out a second score and see a strong one, the consumer may benefit from it,” said Bhatia.
Also, having two good scores can help you bargain with the lender in the future. A low score will indicate a poor credit report which will help you detect any fraudulent activity that may have been carried out in your name. If you have not defaulted but receive a low score, you can get in touch with the credit bureau and/or the institution from where the loan was availed for further assistance.
Also keep in mind, no lender can request to see your credit report without your consent. Usually consent to check your credit report is part of your loan application form. If you haven’t applied for a loan and the report shows that a lender has made an enquiry, there is a good possibility that you may have been exposed to some kind of an identity theft attempt. In such a case, get in touch with the bank immediately.