If you have taken a home loan and not missed a single monthly payment, then you may be able to secure a car loan at a lower rate of interest or get your bank to waive the processing charges.

Similarly, if you are applying for a two-wheeler loan and have old credit card loans pending, it would be prudent to pay them off, as it will improve the chances of your loan getting sanctioned.

The bank's decision in both the cases is based on the credit scores generated by credit bureaus. The credit score concept is yet to catch on in India, but it has been the norm in the western markets for several years.

But soon Indian borrowers will be able to demand similar services.

The country's oldest credit information bureau, CIBIL, launched its ‘CIBIL TransUnion Score' for retail consumers, on Wednesday.

This score, which will be available for a fee of Rs 450, will take into consideration factors such as the loan amount, the nature of loan (secured or unsecured), the tenure, delinquencies (repayment history or defaults if any), number of loans, among others.

The final score is arrived at based on the weightage assigned to each of these aspects . It ranges between 300 and 900 and provides a snapshot of a consumer's credit history.

For instance, a consumer with a secured loan, like a home loan, will be assigned a higher score than a consumer with an unsecured loan like a credit card or a personal loan. CIBIL provides the score along with the Credit Information Report, which is available separately for a fee of Rs 142. While the report is an analysis of 36 months of the consumer's repayment history, the score uses that history and other information to indicate the likelihood of default in future. While lenders have been using the score for the past two years, now individual borrowers can also access it.

Mr Arun Thukral, Managing Director, CIBIL said the score predicts a likelihood of a borrower becoming delinquent in the next 12 months.

“While CIBIL doesn't pass a value judgement over the score, the likelihood of a loan getting passed is higher if the score is higher. Therefore, banks would prefer a higher score so that their risk is minimised,” he said.

Mr Satish Pillai, Senior Vice-President, CIBIL, said that how an individual bank views a score depends on the bank's risk appetite. As of now the report and score are mailed to consumers, within a period of 10 days of the consumer asking for it. But CIBIL is also working on making it accessible online.

“We are developing the process of online authentication of documents required for identification and address proof,'' Mr Thukral said.

CIBIL currently has 500 members, of which 40 per cent are co-operative banks. The credit bureau is also working on providing credit information reports to small and medium enterprises and hopes to launch it soon, Mr Thukral said.

priyan@thehindu.co.in

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