Your cellphone bill is due to be paid on the 22nd of every month. However, only when your service provider bars your outgoing calls, you hurriedly make the payment and it’s the same story the next month. But what if you were told that this delay in payment would mean that it would be difficult for you to get a new postpaid connection in the future?
Telecom service providers, including Vodafone India, Idea Cellular Ltd and Reliance Communications Ltd, have all tied up with Credit Information Bureau (India) Ltd (Cibil), the country’s largest credit information company, to give a score to postpaid cellphone users. Cibil is also in talks with Bharti Airtel Ltd, said Arun Thukral, managing director, Cibil.
Credit score is a number based on your credit report, a summary of your past and current borrowing and your repayment history, which a credit bureau agency prepares. As of now, a credit score is based on home, personal and car loans and credit cards. The score is offered differently by different companies. Cibil’s credit score is a three-digit number ranging between 300 and 900 for those who have a borrowing history of at least six months.
“What with mobile number portability now a reality, switching from one provider to another will be rather difficult if your score is not up to the mark. It will work just the same way as credit scores work for somebody applying for a loan or a credit card,” says Thukral.
So how will you given a score as per your payment history? “Credit scoring is done first at the time of acquiring a new customer and thereafter, it is updated periodically based on payment behaviour,” says Bjas Murthy, associate director, marketing (voice products, services and customer value management), Vodafone India.
When you take a connection, typically the provider’s representative visits the billing address and you need to fill a survey-type questionnaire. The initial score is given based on this questionnaire. This score translates into a credit risk rating and a credit limit—lower the risk, higher would be the credit limit and vice-versa.
“Once the customer starts paying the bill, the payment pattern is studied every month based on which the risk rating and the credit limit is suitably revised—upwards if the customer is regular in payments and showing a capability to pay higher bill amounts and lower if the customer is defaulting on the bill payments,” says Murthy.
A credit limit is similar to a spending limit on credit cards. It is a function of a customer’s usage and past history. Numbers are assigned based on how long you’ve been with a service provider, security deposit, usage and payment history, services opted for. A steady high usage and regular payment means high credit limit. This limit is reviewed on a monthly basis.
Sanjay Agarwal, senior vice-president and group head-retail strategy and branding, Arcil, an asset reconstruction firm, believes that eventually your payment history will impact not just banking related transactions but utilities such as electricity, landline connections and so on. “Your intention to pay and how much of a liability you are will be gauged by your credit score. So do make sure that you start being prompt with your repayments and payments. However, it will depend on the institution on how much of a weightage they put on credit scores.”
The credit score is turning out to be a rather important factor in disbursing loans or credit cards. In a recent report, Cibil noted that banks are now largely focused on lending to consumers with the highest credit rating and that too against secured assets. The report states that the auto loans segment has shown the highest growth in enquiries over the last three years in the retail space, but at the same time delinquencies have also increased to at least 2.5%.