CIBIL launches an upgraded version of its credit score

Credit Information Bureau (India) Limited (CIBIL) has introduced an upgraded version of its Credit Score, named CIBIL TransUnion Score 2.0.The key change in the revised version is the information on newer borrowers that it will provide. Unlike its older version, this product aims to predict repayment behaviour of new borrowers (with less than six months of credit history to show) as well.

"Consumers who earlier obtained a score value of ‘0’, owing to less than six months of credit history in their credit report–will now 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 higher the numerical value of the score, the lower is the risk profile of the individual," stated the official release.

Essentially, a credit score indicates the probability of the borrower defaulting on repayment based on several parameters like repayment track record, number and quantum of loans availed and so on. It is used by lenders to decide on approving or rejecting loan applications.

“This scoring model will enable banks to better identify good customers,” added Arun Thukral, Managing Director, CIBIL. For those with a credit history of more than six months, the scoring mechanism will remain unchanged - Credit Score 2.0 will provide a value ranging from 300 to 900, with 300 indicating the highest risk and 900 denoting lowest risk of default.Theoretically, a good credit score can help you negotiate with your lender for a lower interest rate, but the practice is yet to take-off in India in a big way.