BackICICI Sec and Cibil tie up for credit scores
Customers can get credit scores for the same fee as with Cibil, but can avoid the KYC process
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ICICI Securities Ltd and Credit Information Bureau India Ltd (Cibil) announced this week that the Cibil TransUnion Score and the Cibil Report will be available on ICICIdirect.com. If you are a customer with ICICIdirect.com, you can simply log into your account, complete and verify your personal and financial information, and for a fee of 470, get the scoresheet and the report. The fee is the same as what you will have to pay if you access the report directly from Cibil.
The advantage for ICICIdirect.com customers is that they don’t have to go through know-your-customer (KYC) formalities again, and a bulk of their personal information is already filled in.
As a result, it takes only a few minutes for the report to be generated and sent to the customer.
Why have a credit score?
Your credit score is a numeric value that summarises your credit history. The number itself ranges from 300 to 900, and the higher it is the better. A good credit score not only makes the process of loan approval easier, but it can also help you in negotiating better terms with the lending bank.
“There have been instances where processing fees were waived for customers with good credit scores," said Arun Thukral, managing director, Cibil. However, successfully negotiating a lower rate based on a score is yet to catch on in a big way.
Nevertheless, banks are happier to have customers with a favourable credit history. Your credit history encompasses everything from your housing loan to credit card usage and even your loan enquiries.
What can tarnish this favourable history are issues such as late payments or defaults, high use of your credit card upper limits, the composition of your loan portfolio (secured versus unsecured loans) and frequency of loan enquiries.
Earlier, if you didn’t have any credit history—which means that you have never taken a loan or used a credit card—you didn’t get a credit score. That wasn’t a bad thing; it just meant that you don’t have any credit activity. However, some banks are averse to lending without a credit score.
A Reserve Bank of India committee suggested in a report, Data Format for Furnishing of Credit Information to Credit Information Companies, that credit scores be allotted even to those who have never taken a loan.
This is being done based on sample performance and demography. This way, first-time borrowers will not be denied credit due to lack of history.
There are currently four organizations that provide credit scores—Cibil, Equifax Credit Information Services Pvt. Ltd, Experian Credit Information Co. of India Pvt. Ltd and High Mark Credit Information Services Pvt. Ltd.
Net worth’s role
Financial planning is not just about investing; you also have to consider your liabilities. Knowing your credit score and being aware of your credit report is part of it.
While this won’t directly add to your investment portfolio or decisions on where to invest, it helps to understand how you can manage finances.
“Credit and loans come first for individuals, and then comes investing. We want our clients to have a comprehensive view of their financial status," said Abhishake Mathur, head, investment advisory services, ICICI Securities. Of those who participated in the pilot run of this facility, many were just curious but there were also others who were in the process of applying for a loan, he added. “Having this facility on our site makes it easier for them to know their standing in that process," said Mathur.
Along with the score, ICICIdirect.com also publishes a lot of information about credit scores—how to interpret the numbers and their relevance for individuals.
Such a facility is a good start as it adds to the perspective of looking at financial planning as a comprehensive activity involving liabilities as well. Just the awareness of how lenders or banks consider your profile while extending a loan is an important insight that a credit report gives you. It also helps build discipline for managing your overall net worth.
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