This is What You Should Know about CIBIL Score

This is What You Should Know about CIBIL Score

Your CIBIL score is a critical component lenders use when considering loan applications. As a result, it's essential to comprehend how the score is determined. The Reserve Bank of India has stated that all lenders must examine their new CIBIL score. The score can be seen in your CIBIL report, which is a record that describes your credit history. While your CIBIL score is determined by a proprietary algorithm, the essential components of the score structure are based on an individual's loan payment behaviour.

Don't be surprised if your TransUnion Cibil credit score has dropped during January 2020 and now. The credit information corporation (CIC) has altered how it evaluates debtors. Many people's credit ratings may have dropped since the start of the calendar year due to the new scoring system. So, let's delve deeper into understanding credit monthly CIBIL score and the factors impacting them.

Did you know? CIBIL is not a government entity. It is recognised by the Central Bank, and it is governed by the Credit Information Companies (Regulation) Act, 2005.

What is the CIBIL score?

Your CIBIL score is a three-digit numeric summarisation of your credit history that is calculated using information from the 'Accounts' and 'Enquiries' parts of your CIBIL report. Such as (but not limited to) your borrowing accounts or credit cards, payment history, as well as outstanding amounts' days past due. Based on your borrowing and ability to repay as lenders provide, the score represents your creditworthiness. Your CIBIL score ranges between 300 to 900, and the better your score, the more likely it is that you will be accepted for a loan. In reality, borrowers with a CIBIL score of 750 or above receive 79% of loans.

Also read: What is Emergency Credit Line Guarantee Scheme (ECLGS)

What is the new CIBIL score?

  • The new CIBIL score will provide different advantages at each step of the credit lifecycle.
  • The information contained in the CIBIL Report has not changed. The only difference is how the computer uses this information to generate your CIBIL score.
  • Individuals who have already taken up loans will benefit from the new CIBIL score since it gives a more comprehensive view of their credit activity. This has been accomplished by expanding the length of credit and payback history used to establish the score.
  • The new CIBIL score will enable lenders to extend loans more frequently and better by identifying individuals with credible scores.
  • The new CIBIL score also considers small differences in credit profiles and customer payback behaviour to assist lenders in evaluating risk profiles more accurately and potentially lending to consumers who would have previously been rejected credit.
  • The new CIBIL score ranges from300 to 900, the same as the old CIBIL Score. 
  • However, because the CIBIL Score scoring system has been altered, the numeric number provided for the new CIBIL Score may differ from the numerical value created for the previous CIBIL Score. 

Old CIBIL Score

New CIBIL Score

Based on the credit history of only 24 months

Based on the credit history of 36 months

Before earning a numerical score, they had to have 6 months of credit history.

Based on the credit history of only 24 months

How to see the new CIBIL score?

  • Your CIBIL panel has already been updated with your new CIBIL score. To access your new CIBIL Score, please log in to your account using your login details. 
  • Every time you update your CIBIL assessment, you see the new CIBIL score as part of its commitment to offer you the most up-to-date and relevant information on your credit history.
  • You will receive the new CIBIL Score with your free yearly credit report.
  • On your profile, your recent CIBIL Score is displayed. As a result, the current CIBIL Score displayed is the new CIBIL Score. With a current CIBIL Score subscription plan, you will get to see your prior version of CIBIL Scores (up to 12 months) in the score record part of the dashboard.
  • All of the partner banks and credit agencies are also in the course of switching to a new CIBIL Score, and once completed, there will be only one version of the CIBIL score that everyone in the market will use, streamlining the overall credit assessment process.

Also read: What is CVV Code in Debit and Credit Card?

Factors affecting the new CIBIL score

In addition to credit usage, payment history (number of late payments and amount of outstanding payments), loan applications, and credit mix, the revised CIBIL Score includes new variables like:

  • Creditworthiness (i.e., the extent of the current credit history as measured from the opening date of the oldest credit account)
  • The absolute figures, as well as qualitative qualities of these indicators in your credit report, might influence your new CIBIL score, either positively or negatively.
  • The number of new accounts established and the number of terminated accounts
  • Outstanding balances' long-term trend
  • Credit card transaction history
  • The proportion of actual payback to the total amount owed.

Impact of new CIBIL score on loans

  • The numerical value of the new CIBIL score differs from the previous CIBIL Score due to variations in the scoring methods utilised to create each score. As a result, even with identical information on the CIBIL Report, the new CIBIL Score may generate a lower numeric score than the previous edition. 
  • This decrease in the numeric value of your new CIBIL Score Want to learn about Finance, Investing, and much more!, Checkout our partner blogs.