What is CIBIL Transunion Score ? Explained

Over the past few years, CIBIL has substantially increased its member base as well as borrower base. The members are banks, NBFCs and housing finance companies who provide borrower data to CIBIL. CIBIL now has 800 members with a database of 135m borrowers and 230 individual consumer loan accounts [20% of Indian Population] We’d like to explain in-depth about what CIBIL Transunion Score is and how is it calculated.

What is CIBIL Transunion Score ?
CIBIL score is an objective numeric summary of the credit report generated on an individual. It takes a “snapshot” of a consumer’s CIR (Credit information report) and with the use of advanced analytics moulds the information into a 3 digit number representing the probability that a consumer will default on a credit facility over the next 12 months. The possible score ranges between 300-900.

Sample CIBIL Score is as Shown in the Report Below

What is a Good / Bad CIBIL Score ?
Score interpretation varies from bank to bank. For some 700 may not be a Good Score while for the other it maybe acceptable. The following chart shows hos Credit Score of consumers has improved between 2008 and 2011 due to Better credit discipline from banks.

The fact that 90% of retail borrowers fall in the 700+ score (which is considered to be a good score) category also supports the point that credit discipline of borrowers has been good.

CIBIL’s database shows that the percentage of loan applications sanctioned with credit scores above 800 had risen to 57% in FY2011 from 23% in FY2008. This indicates that banks have been preferring customers with better credit scores, and is probably the reason behind the low default rates in retail in this cycle. It could also be that larger sections of borrowers have fallen in the 800+ category, increasing the sample size itself. In other words, it could also be a function of better credit discipline of borrowers.

In the next Article we will enlighten you about How CIBIL Transunion Score is Calculated. Questions, Critics and Comments are welcome.

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