Monday, 2 March 2015

Everything You Need to Know About CIBIL Score 2.0

If you are a prospective home loan customer who is planning to apply for a loan, your CIBIL score would be one of the most important factors that a bank will consider while taking a lending decision. You might be required to check your own CIBIL report  in case you face any difficulty in getting an approval from banks.
You will, however, now receive a CIBIL TransUnion 2.0 report which is an upgraded version of the previous report. CIBIL TransUnion 2.0 follows a different approach for evaluating the past history of the borrowers and is considered to be an improved version of the earlier CIBIL credit report.

CIBIL TransUnion Score 2.0 is a score that is calculated based on various parameters on the consumer’s credit history and predicts the probability of default by the consumer. This credit score helps the banks in understanding the risk profile of its customers and accordingly take their lending decision.

One of the key changes and improvements in CIBIL 2.0  is that it also calculates a score for a new loan borrower with less than 6 months of credit history. In the previous version, any borrower who had less than 6 months of credit history would have got a score of 0. But, with CIBIL 2.0, the borrowers will get a score of 1-5, where 1 represents the highest risk of default and 5 represents the least risk of default.
The score is dependent on various parameters such as loan type (secured or unsecured), past credit seeking activities (like number of loan enquiries), 3 months overdue in any month for the past loan period, demographics (like age and location) etc.
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This feature can be especially helpful for those borrowers who have a short credit history of less than six months and need to take another urgent loan. In the past, even though the customer met the eligibility criteria, there was a possibility that his loan might get rejected by the banks for want of adequate credit history.
However, with CIBIL 2.0, even the new loan customers get a credit score, thus improving their chances of getting a new loan again within a short period.
In terms of credit score for borrowers who have 6+ month of credit history of any type/form of funding, the credit report will provide a score of 300-900. Banks may apply cut offs different from the cut-offs they used on the earlier reports while taking a loan decision. For instance, an 800+ in the previous report should now be equivalent to a score of 600-700 in the newer version.
The new CIBIL Score 2.0  is very helpful in determining a prospective borrower’s repayment capability. The report incorporates India specific factors related to customer demographics and the changing customer behaviour while calculating the score. 
CIBIL 2.0 has been tested on old data records of lenders and is being seen as an important tool in studying and modelling the behaviour of customers with high risk profile.

This article should have provided you a good understanding of CIBIL 2.0 and its implications for new loan borrowers. If you need further clarifications on CIBIL 2.0, please feel free to get in touch with us at