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 care@myloancare.in.