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How CIBIL and Experian score first-time loan applicants

Your employment profile and social media accounts are checked by financial institutions to assess your credit risk levels

April 28, 2021 / 02:59 PM IST

Banks and other lenders often rely on your credit score – going by your past repayment record – to decide if your loan application should be accepted or rejected. But what if you have never borrowed or have no credit card till date? Now, if you apply for a loan, how would banks decide if you are a worthy borrower?

TransUnion CIBIL recently launched a new algorithm to assess first-time creditors, or new to credit (NTC) borrowers as they are known in banking parlance. Called CreditVision NTC Score, this will help assess a NTC consumer’s eligibility. “TransUnion CIBIL is a late entrant to this space,” says Kunal Varma, CBO and Co-Founder of MoneyTap. Experian Credit Services, another credit bureau in India, has been offering NTC score for over four years now and financial institutions using their services get an NTC score of the new-to-credit consumer if she is a first-time borrower. Even digital lenders have in-built algorithms to evaluate an NTC consumer’s loan inquiries.

The firm’s thrust comes on the back of the large number of loan inquiries made by NTC customers.

“Overall, nearly 35 percent of loan applications made by NTC customers are approved. However, the approval rates differ based on the loan product asked for,” says Neeraj Dhawan, Managing Director of Experian India. For instance, lower-ticket products such as personal loans, consumer durable loans and two-wheeler loans have higher approval rates in the range of 40-45 percent, according to Experian India.