2020 seems to be the year of change. Right from changing portfolio (owing to highly volatile markets due to global COVID19 crisis), we have seen the sharpest lending rate cuts this year. In the backdrop, there is one little alteration to your Credit Rating. Well, CIBIL has brought about a change in the algorithm to calculate data points for evaluating your CIBIL Score!

Do not be surprised if you find that your CIBIL Score has dropped. The new CIBIL Score analyses individual’s credit lifecycle with more precision. It is basically a sharper revision in the evaluation of the old scoring system. Like the previous CIBIL rating method, the new CIBIL also varies between 300 to 900 range. It is an improved version and takes a deeper dig at consumer’s creditworthiness, says Credit Information Bureau (India) Limited (also known as CIBIL or Trans Union CIBIL Limited).

What is a new Credit Rating Algorithm Change all about?

Now onwards, individuals with less than 6 months of credit history will get a Credit Score. Besides the 5 major factors which were credit repayment history, credit utilization, loan queries, and credit mix, the new CIBIL Scoring system will also consider new variables such as:

• The new report assesses the score of borrowings on 36 months data, in place of 24 months.
• Depth of credit. The depth entails the duration between your present credit account from that of your first credit account.
• If there has been a trend of maintaining outstanding balances in the long run.
• The history of transactions on Credit Cards
• What’s the ratio of actual repayment amount to the total amount due
• The count of how many new accounts you have opened or closed

Thus all these factors will give a detailed outlook on your credit behaviour. Depending on your performance on these parameters, your credit rating will improve or downgrade and make a New CIBIL Score.

New Credit Rating vs. Old Credit Rating (what’s a difference)

According to TransUnion Cibil, while in January, 60% of the total consumers had a score of 775 or more, but now only 37% of consumers have 765 or above score. It is important to note that the change in credit rating will not affect your credit approval as most lenders have also tweaked their lending policies according to the latest changes incorporated by the credit rating bureau. Thus the change should practically not hurt your borrowing capacity at large. However, in some cases, the impact could be a real one.

Now let’s take a delve deeper into new CIBIL’s credit rating system and find out answers to frequently asked questions of borrowers.

New CIBIL Rating System: FAQs

✅ What has caused a change in my CIBIL Score?

Your CIBIL Score is based on an algorithm, and any change in this algorithm brings the change in the final rating. This credit scoring algorithm is primarily based on a large number of data points and macro-level credit trends. By updating the algorithm, the Credit Bureau ensures the efficacy of the rating system in evaluating credit behaviour according to the latest trends. The precision of the rating system provides more effective predictability of the probability of default, consumers’ creditworthiness, and repayment capacity.

✅ What are the benefits of the new CIBIL Score?

The new credit rating will improve the precision of creditworthiness and will thus let the lender lend the more confidently. Also, the new borrowers will be able to get a rating before six months. Therefore the greatest benefit of the new credit rating system is a better match and better terms.

✅ Why did my CIBIL score drop?

This is because of a change in the CIBIL’s scoring algorithm. If there is no change in your credit history, you need not worry about a lowered score. The slight difference in CIBIL score due to the updated algorithm will not impact your loan application.

✅ Will a new score change my loan eligibility?

Though the numeric value of a new credit score might be different from the old CIBIL Score’s value, it should not impact your lenders’ decision for approving a loan. The lender’s final decision is always based on its credit policy, and thus change in the CIBIL algorithm will have minimum impact. For instance, a new scoring system may rate 724 of the earlier version as 701, but the banks have also tweaked their policies accordingly. The customer has little to worry about the scoring system.

✅ Why do I see different versions of the CIBIL score on my CIBIL dashboard and bank’s records?

Well, all the member banks and credit institutions have not migrated to the new CIBIL Score yet. The process is ongoing and may take some time. Thus it is normal to see a variation in your lender’s records with that of the score that is pulled out.

✅ What are the factors that make my new CIBIL Score?

All factors that made your old score are still valid. So, previous factors such as credit utilization, payment history, credit queries, and credit mix will make your new score. Besides, it will also incorporate some new variables: Depth of credit, Long term trend of outstanding balances, transaction history on Credit Cards, the ratio of actual repayment amount to the total amount due, number of new accounts opened, and closed.

✅ Do I need to apply for a new CIBIL Score?

Your new CIBIL Score is automatically updated on your CIBIL dashboard. You need not apply for it. Simply log in to your dashboard and see the score. Now onwards, your free Annual Credit Report will also show a new CIBIL Score.

✅ Can I check my old CIBIL score?

Well, your dashboard will display the latest CIBIL. If you want to see older CIBIL Scores, it is possible to see historical score data up to 12 months. Go to the score history section in the dashboard via an active CIBIL Score subscription plan.

✅ Is there any choice to choose a new or old version of the CIBIL score?

No, it is an algorithm update, and there is no choice to choose the rating system.

✅ Is there any change in my Credit Summary?

No, there is no change in the credit summary.

✅ Is there any change in my Score Analysis?

Yes. A Score Analysis is a brief on specific factors that have impacted your CIBIL Score. It gives you feedback on how you can improve your score. Thus, a new Score Analysis in your credit report will include a broader explanation of factors that will help you achieve a better score according to the new evaluation system.

✅ How do I improve my score under the new CIBIL rating system?

As a rule of thumb, you should always maintain a good credit history if you want to have a good credit score. Besides, keep the following factors in mind:

1. Pay all types of dues on time; a late payment will reflect negatively.
2. Optimally use your credit limit or say, keep credit utilization low.
3. Maintain a healthy credit mix of secured and unsecured loans.
4. Avoid too many loan queries.
5. Always monitor the credit habits of your co-signer, guarantors, and joint account holders.
6. Review your CIBIL Score regularly.

✅ Is there any new addition to the information section of CIBIL Report?

No. There is no change.

✅ Can I raise a dispute for inaccuracies on the report?

Yes. You can click ‘Raise a Dispute’ link in your CIBIL dashboard. There is no change in this regard.

✅ Is the population ranking available for the new CIBIL score?

Yes. You can access the required information on the CIBIL dashboard.

✅ Why did I not receive an alert to mark the change in the CIBIL score?

Well, the score change alert is a notification for a trigger affecting your score. These triggers could be late payments, new credit applications, etc. However, a change in score due to the internal evaluation process is not a credit history trigger, and thus you did not receive any notification alert.