The Credit Information Bureau of India Limited (CIBIL), is on its way to introducing a new scoring system called CIBIL TransUnion.
Under this new scoring system, scores will range from 1 to 5, with 1 representing highest likelihood of default and 5 representing lowest likelihood of default. This new system will provide credit scores for new borrowers after taking into consideration information on factors like:
- Type of loan (secured or unsecured).
- Older requests for credit (volume of loan requests).
- Up to 3 months over-due for any past loan.
- Demographic information like age, location, income, etc.
These factors will determine your score as a number between 1 to 5, and here’s why some people have reported their CIBIL TransUnion score as 0 or -1.
If you have no (or little) previous borrowing history, and no track record on which to determine credit-worthiness, CIBIL will assign you scores of 0 or -1 respectively:
- CIBIL score 0 means that information about the borrower’s credit history is available only up to a period of less than 6 months in total. Also known as “NA” or “not applicable”.
- CIBIL score - 1 means that no information about the borrower’s credit history whatsoever. There is no information to report, hence this score is also known as “NH” or “no history”.
Although this basically isn’t a bad position that you have gotten yourself into, most banks and NBFC lenders will only lend to those who they feel can pay them back. A score of 0 or -1 could mean that you won’t get a loan, but some good banks and NBFC lenders are looking at credit appraisals, income proofs, employer and employment details etc. and still lending despite 0 or -1 CIBIL score.
Other credit information agencies in India are also adopting a credit rating system for potential borrowers who have less than 6 months of credit history. Equifax, for example, is issuing scores ranging from 300 – 900 similar to the scores for those with satisfactory credit history. Experian has a scale of 1 – 6 which is used to rate borrowers with less than 6 months of credit history with 1 being most risky and 6 being least risky in terms of defaulting on loans.
How to get a loan despite having a CIBIL score of 0 or -1.
You can just talk to the bank and explain how and why you are an eligible candidate who is stuck in the unfortunate position of having a lack of credit history, and get the ball rolling. Submit income proofs, a letter from your employer, etc. and convince the bank that the CIBIL score of 0 or -1 is an inaccurate representation of your credit-worthiness.
Once you’ve secured your new loan, paying it off correctly will result in your score being raised and positive remarks in your CIBIL TransUnion credit report. You must make each and every EMI payment on time, this will not only save you from penalties and fines, but will also go a long way in improving your credit rating. It says that the first loan you took was successfully repaid in full and on the same terms on which you took the loan (try not to foreclose or arrive at a “settlement” with your bank).
Your loan repayment details and remarks from the bank will be present in your new CIBIL TransUnion credit report.
Most banks today are using these scores to determine credit-worthiness for borrowers will less than 6 months of borrowing history and/or no credit history at all.
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