YOU KNOW your blood group. You can provide the highlights of your horoscope. Soon you will be able to flaunt one more symbol of pedigree — your credit score.
A credit score is a three-digit number that will be used to evaluate your credit worthiness by lenders.
A lower interest rate is the benefit you will get if you have a good score.
In the US, for example, where credit scores range from 300 to 850, a person who has a score of anything above 750 is likely to get loans at a rate that is about 1.5 percentage points lower than somebody with a score of about 600.Credit Profile in India
The score is based on a set of criteria that includes, among other things, past loan history, number and amount of loans taken, number and amount of loans defaulted, filings for bankruptcy, credit card payment delays, balance outstanding in various loans and the like.
Indian banks follow a fairly uniform rate of interest for all borrowers currently.
But soon, there will be a certain degree of discrimination — both positive and negative — depending on your credit risk.
Mr S. Santhanakrishnan, Chairman and CEO of Credit Information Bureau of India (CIBIL), which is in the process of getting the score ready, said, "We have the credit history for the last 18 months. We should be able to start providing credit scores within six months. The major benefit that will come from this is that borrowers will be disciplined — because their track record is being documented. And the rewards for good behaviour will be lower rates. Such borrowers will be able to command a premium in the market."
As things stand now, only the banks can query CIBIL for the credit score. But customers too can get the score from banks, as they are obliged to share the information with them.
What do banks get for the trouble of checking a credit score? Mr Santhanakrishnan said, "Banks will now know ab initio the risk that borrowers have. Smaller banks that do not have elaborate risk management and credit appraisal systems will certainly benefit from this."
CIBIL has so far amassed 42 million individual records from various banks and finance companies. Mr Santhanakrishnan expects the number of records to touch 75 million within the next couple of months. He said that banks have begun using the system in a "substantial way" for lending decisions.
Posts
