About Your CIBIL TransUnion Score
July 17, 2011 12 Comments
The CIBIL TransUnion Score is India’s first credit score for individuals.It is a three-digit numeric summary (ranging from 300 on the lower side to 900 at the higher side) of a consumer’s credit history, compiled from information received from lenders who are members of CIBIL. The model followed by CIBIL predicts the likelihood of an individual missing more than three payments on a credit line over the next 12 months. For the last few years banks have had exclusive access to this score.Now individuals too can access their CIR and credit score for Rs450.
To understand the impact of the CIBIL TransUnion Score on an individual’s loan application we need to take a look at the table below.It shows loans sanctioned by loan providers based on an individual’s CIBILTransUnion Score in 2008 and 2010.
The table shows that 90% of new loans sanctioned in both 2008 and 2011 were to individuals who had a CIBIL TransUnion Score of 700 or more.However, the data also indicates that over three years, the lending institutions’ preference has shifted from individuals with a CIBIL TransUnion Score ranging between 750 and 799 in 2008 to individuals with a credit score of 800 and above in 2011.
This means that nowadays the higher your Cibil TransUnion Score (ie, the closer it is to 900), the more likely you are to get your loan application approved.And if the trend continues in future people will have to maintain higher scores to secure credit.The reason being that a score closer to 900 provides the loan provider more confidence that the individual would be in a good position to repay the loan.
According to the CIBIL website following are the various factors which influence the CIBIL TransUnion score:
3.Length of Credit History
4.Number and types of credit accounts
5.Utilization of credit, and
6.Applications for new credit.
However the exact formula used to calculate the credit score is not available to the general public.
Nowadays, having a high credit score might be increasingly necessary to have one’s loan applications sanctioned however it doesn’t by itself guarantee a loan approval.Lenders also consider the applicant’s total income, overall debt burden and how the person fits into their internal credit policy before deciding upon a ‘s loan application. Hence, if a person’s EMI to income ratio is over the set cut-off percentage, his/her loan application may get rejected despite having a high credit score.
So simply put, the Cibil TransUnion Score is like the marks one earns in school examinations. Higher marks (credit score) increase the chances of your being accepted in a college (getting a loan approved), but they don’t guarantee your admission. A more overall evaluation of your extracurricular activities (income level, overall debt burden) is required before you are granted admission.Similarly, different colleges will have different cut-offs with regards to the marks (credit score) required to gain admission.