Credit score: A good credit history for a secured future
So along with CIBIL, Equifax Credit Information Services and Experian Credit Information Company have risen in importance for the economy and for all of us. And yes, they have the legal and regulatory backing to access information from their member banks and assign credit scores to individuals to map their risk profiles.
“Earlier while the banks used to give loans to entities with a score of 600 out of 900 in the CIBIL profile rating, now they mostly prefer a higher rating of around 800,” said Arun Thukral, managing director, Credit Information Bureau of India Limited (CIBIL).
While credit scores are used widely by lenders in countries like the United States for processing loan applications, in India too, banks have become increasingly wary following the 2008 global financial crisis that had its origins in bad housing loans. Further, the tight liquidity conditions in the country over the past one year have made banks more cautious and choosy in giving out loans.
Every credit information company has its own method of calculating credit risk and hence would give a different score. For instance, CIBIL provides credit scores ranging between 300 and 900 to individual consumers by compiling details of bank accounts, loans, credit cards. It considers a score of 700 as essential for getting a loan, but warns that