Genuine borrowers rejoice. The data will also help bring down interest rates, says Cibil managing director Arun Thukral. "Till now, the genuine borrower used to get a loan at the same rate as the one who was likely to default. This was because the lending companies did not have the means to distinguish between the two. Now, those who have a better score may get loans at lower rates."
Says Cibil chairman S. Santhanakrishnan: "We have prepared CIRs of over 100 million borrowers, based on their 30-month credit history. Our reports do not indicate whether the borrower is good or bad. It merely compares his creditworthiness and gives details about his credit history. It is up to the lending companies to decide whether the customer is likely to default or not." Clearly, the data will help lending companies process loans much faster.
Deciding factors. The score will be computed based on factors
such as the date of opening the loan account, the history of payment and even demographic factors, such as age of the person. Preference will be given to older people, or to those with a cleaner credit history. The data will be upgraded on a monthly basis. If you are borrowing for the first time, there will certainly be no score for you.
Customer rights. Existing Cibil reports (without the score) are already being shared with most banks and finance companies. Several loan requests have been rejected on the basis of this report and borrowers have consistently complained that they were not told why the loan was rejected. Santhanakrishnan says that if the loans get rejected based on Cibil reports, the customer has the right to get a copy of the report and can request for the same from the bank.
Obtaining the score directly from Cibil may take some time. However, says Thukral, "after the RBI guidelines are out, this would be made possible". If the customer feels that there is a mistake in the data, he would have the right to approach the relevant bank or financial institution and get it changed. They will subsequently inform Cibil about the change.
The shortcomings. At present, Cibil will generate only general scores for all loans and not specific scores for particular loan products. The score is also not applicable to cooperative banks or farmers. The score is only applicable to banks and financial companies in metros, urban and semi-urban areas.
