what is cibil transunion score features benefits and impact

TransUnion CIBIL Score 2.0: Features, Benefits, Impact

April 15, 2024 • 579 views

TransUnion CIBIL, India’s leading credit information bureau, has developed the latest version of the credit scoring system, CIBIL TransUnion Score 2.0. It incorporates advanced technology to access and analyse individual data in detail, allowing lenders to make informed credit decisions. Let's understand the features of this new TransUnion CIBIL score 2.0 to gain a better understanding of its importance in the financial landscape. Keep reading!

What is TransUnion CIBIL Score 2.0?

The new TransUnion CIBIL score 2.0 is an updated credit scoring model that enables lenders to decode the credit repayment behaviour of loan applicants more efficiently. It introduces a new risk index for first-time borrowers. It rates borrowers with less than 6 months of credit history between 1 and 5, with 1 being the high-risk borrower. It is especially effective in differentiating low-risk borrowers from high-risk borrowers.

This new version is designed considering the current trends in the Indian market, changing consumer profiles, and consumer movement from personal loans and credit cards to home and auto loans.

Features of the TransUnion CIBIL Score 2.0

Here are the features of TransUnion CIBIL score 2.0:

  • Customers With More Than Six Months of Credit History

Like the previous CIBIL scoring model, individuals with a credit history of more than six months are rated on a range from 300 to 900. Under this new model, the ideal CIBIL score ranges between 662 to 697 which was 751 to 800 under the previous model. A CIBIL score closer to 900 carries the lowest amount of risk for lending institutions.

  • Customer With Less Than Six Months of Credit History

The new CIBIL scoring model uses a risk assessment index chart to determine the risk associated with borrowers with limited credit history. The risk assessment index is a scale from 1 to 5. This scale classifies new borrowers into high, medium, or low-risk categories. A higher  CIBIL TransUnion Score suggests a lower risk for lenders. For example, a score of 1 means the highest risk, while 5 means the lowest risk.

  • NA / NH or -1

In the TransUnion CIBIL score 2.0 system, NA/NH or -1 is assigned to individuals with no credit history. Moreover, if the credit history of an individual is not reported to CIBIL for more than 24 months, he/she can be assigned NA/NH or -1.

Over time, lending institutions are gradually adopting the new version to keep up with changes in borrower's profiles and their credit histories. It helps banks and NBFCs to automate risk management and make informed credit decisions.

Benefits for TransUnion CIBIL Score 2.0

Here are some of the advantages of CIBIL TransUnion Score 2.0:

  • Enhanced Credit Decision-Making

The new score system is available for all CIBIL member financial institutions and helps them make more informed credit decisions. It allows them to segregate borrowers into several categories based on their credit history and repayment behaviour.

  • Provides a Scientific Rationale

The CIBIL 2.0 helps financial institutions by providing a scientific rationale behind a score which provides clarity and helps them in better risk assessment. This ultimately benefits financial institutions to minimise their bad debts/NPAs (non-performing assets).

  • Simplified Lending Process

The new score system of CIBIL has enabled lenders to assess credit risk, reflecting borrowers' creditworthiness more accurately. This score is more dynamic and captures each and every aspect of the borrower's credit-related activities.

Risk Index for TransUnion CIBIL Score 2.0

Here is the risk index demonstrating the level of risk for a borrower:

Risk Index

Meaning

NA/NH or -1

  • Individuals with no credit history or
  • When CIBIL has not received any credit-related information in the last 24 months.

1

Highest risk of becoming a defaulter.

2

Highest risk of becoming a defaulter.

3

Medium risk of becoming a defaulter.

4

Low risk of becoming a defaulter.

5

Lowest risk of becoming a defaulter.

 

Impact of TransUnion CIBIL Score 2.0 on Borrowers

As per CIBIL Score 2.0, your credit score may be lower than the previous version. However, there is nothing to worry about as there are many adjustments and alterations in the new system. The difference between the old and new versions will not impact the lending decisions.

Also Read - What are the Steps To Login On CIBIL Portal?

Impact of  TransUnion CIBIL Score 2.0 on Lenders

With this new scoring system, financial institutions can make informed decisions. It's a useful tool for determining lending and loan terms, especially for individuals borrowing for the first time. Also, the new scoring system helps lenders manage risks better and make smarter decisions than before.

Also Read - How CIBIL Score is Calculated | A Step-by-Step Guide

To Conclude

TransUnion CIBIL score 2.0 is a new credit scoring model introduced by TransUnion CIBIL. It marks a significant advancement in the credit scoring system, offering lenders a more refined and accurate tool for evaluating borrowers' creditworthiness. Its enhanced capabilities not only facilitate efficient credit approvals but also strengthen risk management practices for lending institutions.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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