ATM :: You can get a credit score even if you don’t have any loans

Credit scores were till recently assigned to those people who have taken loans in the past
Vivina Vishwanathan | WED, MAY 07 2014. 06 01 PM IST |


Credit scores were till recently assigned to those people who have taken loans in the past. But now even those who have never taken a loan can get a credit score. This is one of the two changes that have taken place in credit scores based on suggestions by a Reserve Bank of India committee in its report Data Format for Furnishing of Credit Information to Credit Information Companies, which was released on 22 March. The second change has to do with uniform representation of credit scores.

Uniform score range

It was suggested that all credit information companies (CIC) report credit scores in the range of 300-900, as is the standard practice at Credit Information Bureau (India) Ltd, or Cibil, the country’s largest CIC. The first to follow the suggestion is Experian Credit Information Co. India Ltd, which has changed its scoring pattern from 100-1,200 to 300-900. So, if your score moves from 1,200 to 900, don’t panic. It’s only because of a change in representation. For instance, a score of around 1,000 in the older version may come down to, say, around 850. Eligibility criteria of financial institutions seeking an individual’s scores will also change accordingly—if 1,000 was the eligibility level, it will be lowered to 850 now. The new score is an updated version. According to Experian, a credit score is a statistical exercise based on algorithm. With changing demography and borrowing behaviour of the customers, an updated data will be used to calculate the new score. Equifax Credit Information Services Pvt. Ltd, another CIC, however, continues to use a range of 1-999.

No-loan scores

Experian has also launched credit scores for those who have never taken a loan. This is in line with the RBI committee’s recommendation that first-time borrowers should not be denied credit due to lack of history. This score will be calculated based on details such as sample performance and demography. The grading scale would be one to six—one meaning highest risk of default, and six, the lowest. Credit score is a number based on your credit history, which is a summary of your past and current borrowings and repayments. Usually banks use this score to assess your repayment capacity and the chances of you defaulting on loans. Initially, CICs used to give a credit score only if you had a history of borrowing of over six months. Then the duration was reduced to less than six months.

How much does it cost?

As of now, Experian’s credit scores are available only to financial institutions, but will be available to individuals within a month, for a fee. The cost will be as per industry standards (Cibil currently charges Rs.470). The credit score for customers who have never taken a loan would be priced differently.

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