All of you know that CIBIL score is a very important eligibility requirement when you want to avail a loan. Lenders always insist that your score should be 650 and above if you want to avail any kind of secured or unsecured loan. The score is a measure of your credit history, the loans you have taken and the repayments made. Recently, a new score has been introduced which is called the CIBIL TransUnion Score 2.0. This score is considered to be an upgrade from the old credit score. The new score is said to measure the credit risk of the borrower more effectively compared to the earlier variant. As such, the new Cibil score is a good tool for lenders to correctly estimate the probability of repayment of their loan.
How does the score work?
The new score works on the period of credit taken by the borrower. For borrowers who have a credit history of more than six months, the score allots a value of 300 to 900. For newer borrowers who have less than 6 months of credit history, a value of 1 to 5 is allotted. This helps the lenders understand whether the borrowers are new or if they have previous credit experience.
Interpreting the score
Interpreting the new score can be done as follows –
- For existing borrowers who have a credit history of more than 6 months, if their old score falls in the range of 751 to 800, the new score would fall in the range of 662 to 697. Thus, under the new score, the ideal score would be in the range of 662 to 697
- For new borrowers who are allotted a score of 1 to 5, 1 would mean that the borrower presents a high risk and 5 would mean that the risk of default is quite low.
- Borrowers who have a score of NA or NH means that the individual has no credit history which has been reported. It can also mean that the individual has a credit history but the history has not been reported in the last 24 months.
How to calculate the new CIBIL TransUnion Score 2.0?
Calculation of the score is simple. The score can be calculated online through websites or FTPs or can be accessed from Credit Information Reports, CIBIL Portfolio Review Reports, or CIBIL TransUnion Bureau Credit Characteristics.
Benefit of the new score
The new version of the CIBIL score is a better parameter of judging creditworthiness than the older one. This is because of the fact that the new version takes into account the credit vintage of the borrower. It categorises borrowers as new and existing by allotting them different numerical values. As such, lenders can ascertain the lender’s credit risk with much more accuracy and prevent their loans from turning into Non-Performing Assets (NPAs). Given the recent times when more and more lenders are being burdened with increasing NPAs, the new CIBIL TransUnion Score 2.0 is a better tool for ensuring the repayment of their loans.
So, if you would be applying for a loan, understand what the new CIBIL TransUnion Score 2.0 is all about. The lender would judge your application on your new score and so you should know your score before you apply for the loan.