CIBIL TransUnion Score 2.0 - Know About Features & Risk Index

Credit information agency TransUnion CIBIL pioneered the concept of credit scores in India. The credit score, or CIBIL score, is widely used by banks and non-bank lenders to scrutinise borrowers applying for any type of loan. Now, TransUnion CIBIL has come up with a new form of the credit score, the CIBIL TransUnion Score 2.0.

The CIBIL TransUnion Score 2.0 is the updated version of the credit report that is believed to be the most trusted credit scoring model for lenders. It uses technology to analyse data that helps in taking informed decisions, thereby mitigating risks and boosting development in business.

The new framework helps loan providers predict the likelihood of default on one or more credit lines, helping lenders classify borrowers as risky and non-risky. The score model is based on the information obtained from the four credit bureaus currently operating in India. Presently, the new score is active for CIBIL’s 862 member banks and financial institutions.

Features Of The CIBIL TransUnion Score 2.0

A comparative study between the old and the new score model of CIBIL shows a drop in the score under the new framework due to a change in the behaviour of borrowers. This drop is due to a change in the ratio of secured loans as opposed to unsecured loans as well as long-term loans against short-term loans.

The new model is built on credit history data, taking into account the customer’s lifecycle and his repaying ability. So, it is believed to be a more effective predictor of risk designed to help lenders categorize high risk borrowers from low-risk borrowers and take necessary decisions for approving loans.

Some of the new features of the CIBIL TransUnion Score 2.0 are:

• Customer With Less Than Six Months Of Credit History:

The new model introduces a risk index chart that aids in forming objective risk decisions, especially for borrowers with limited credit history. For new-to-credit customers or borrowers who have a credit history of less than six months, the model gives a risk index.
The risk index is a number that ranges from 1 to 5, helping classify first-time borrowers as high, medium or low risk. A high CIBIL consumer score means increased risk for lenders. So, while 1 is the lowest risk, 5 indicates the highest level of risk. This score considers the number of days by which a repayment of any particular kind was delayed during any of the months.

• Customer With More Than Six Months Of Credit History:

For people with a credit history of more than six months, the credit score 2.0 still awards the customers a value between 300 and 900. A score closer to the 900 mark carries the least amount of risk for the lender. The ideal score under the new framework has been reset to 662-697 as compared to the ideal score of 751-800 under the previous framework.

• NA or NH:

Earlier, borrowers with less than six months of credit history had no credit scores. Under the new scoring system, -1 or NA/NH is assigned to individuals who have no credit history. Similarly, individuals whose credit history have not been reported to CIBIL over the past 24 months will be assigned -1 or NA/NH.

Gradually, banks are adopting the new version to adapt to the changes in the consumer profiles and credit data. The CIBIL TransUnion Score 2.0 is instrumental for approving credit and defining credit terms, helping loan providers automate processes and make reliable credit decisions.

Ways To Access CIBIL TransUnion Score 2.0

The updated model is easily available to users through different channels such as the CIBIL website, the lenders’ website and other online platforms.

Conclusion

The credit score is based on an individual’s loan repayment behaviour, length of credit history, credit mix and credit utilization. Having a good CIBIL score is a reflection of good financial history, meaning lesser risk for lenders and better loan term for borrowers.

The CIBIL 2.0 TransUnion Score is an updated model of the previous version of CIBIL score. It is a new financing approach that helps lenders judge borrowers' creditworthiness better. It is a free tool available across online channels. Furthermore, CIBIL TransUnion Score 2.0 encompasses an updated risk index for first-time borrowers that can help lenders make right credit decisions and segregate unreliable loan applicants.

This model considers the borrowers’ life cycle and his ability to repay the loan amount. As per the new model, the ideal credit score for a first-time borrower has been presently set at 662-697.

If you are wondering where to check your personal credit score, you can do so by accessing the website of a credit information company. Else, you can look for banks and financial institutions like IIFL Finance that lets you check the credit score free of cost. All you need is to visit the IIFL website or download IIFL Loans App and fill in your details.

IIFL Finance, one of India’s biggest non-banking finance companies, provides a variety of credit products including business loans, personal loans and gold loans. Moreover, it offers the most competitive interest rates and repayment terms to borrowers with high credit scores.