New credit scoring model by Cibil and TransUnion to assess your worth

A new credit scoring model was launched for individual borrowers by Credit Information Bureau of India (Cibil) and TransUnion. A new model will be help lenders in evaluating borrowers‘creditworthiness.

In the mean time, banking regulator the Reserve Bank of India (RBI) will soon be issuing rules which will make possible for co-operative banks to be members of CIBIL.

The new credit scoring model — Cibil TransUnion score — will foresee the possibility of a customer becoming a defaulter in more than 91 days on one or more lines of credit.

In starting the creditworthiness would be decided on products like credit cards, personal, home and auto loans. TransUnion has launched a similar model in four other countries — Hong Kong, Shanghai, Korea and South Africa.

Speaking at the press conference on the launch of the product, TransUnion vice-president for international solutions and operations Geoffrey Miller said, “The scoring model factors in the payments history, outstanding debt, credit account history, recent credit inquiries and the different types of credit the borrower has availed of.”

The model does not feature statistic information like the religion, place from where the loan was availed of, or the employment history like the type of job and the salary drawn by the borrower.

The criteria for rating the borrower under the new credit scoring model is an individual should have availed of at least one loan six months ago for Cibil. The range of the scoring starts from 300-900 points, where the 300 is for the worst-rated individual, while the best rates would be 900 points.

Cibil chairman V Santhanakrishnan pointed out that at initial stage only the schedule co-operative banks will be allowed to be members of Cibil, and later on, regional rural banks will be permitted to become the members of Cibil.

The list of CIBIL members include 77 banks, 32 NBFCs, six state financial corporations, 10 financial institutions and two credit card companies. On the peripheral, Mr Santhanakrishnan pointed out that co-operative banks would derive maximum benefits from Cibil since they have information of over 90 million individuals.

He said,“Similarly, insurance companies, telecom companies and credit rating agencies have shown interest in becoming member of Cibil. However, RBI will issue guidelines on this.” While speaking to at the press conference during the launch of the product, Mr Santhanakrishnan said that with the increase in available credit options, borrowers took advantage of the system by moving from one institution to another even though they had defaulted in earlier banking relationships.