How Have Credit Scores Changed in the Past 10 Years?

09-Aug-2017 written by : FSI-Team

The banking industry has evolved tremendously over the past decade. Banks and Non-Banking Financial Institutions are now largely focused on digital banking services and products and are actively incorporating new-age financial technologies in their current portfolio.

While cashless transactions have increased, online loans have picked up the pace, and banking has become a lot of convenient and simple for an average consumer today, another major change has taken place in credit score calculation methods.

The following are some of the major ways how credit scores have changed in the past 10 years in India:

1. Rise of New Players

For a long time, CIBIL was the only big credit rating agency in India that banks and other entities relied on for the credit information regarding their customers. It was established in 2000 and has been operational ever since.

However, around 2010 new credit rating players such as Experian, High Mark, etc. emerged on the surface as rivals to CIBIL. Since their credit score calculation methods and the scoring range itself (Equifax scores on a scale of 1 to 999 while CIBIL scores on a scale of 300 to 900) vary you may get different results from different credit reports.

2. Free Credit Report

As per new RBI ruling, all the credit rating agencies in India are required to provide a free credit report per year to every individual. This wasn't the case before January 1, 2017, which was the period when individuals had to pay to get their credit report (Rs.550 for CIBIL report, for instance). And it was the same with all the credit rating agencies. While the fee varies from one to another, and some charged separately for the credit score, one thing was common that you had to pay at any rate. However, now you can get a free credit report to check how likely you are to get a personal loan or a home loan.

3. "Advancement" in Credit Score Calculations

To improve the accuracy of the average credit score calculation, credit rating agencies have started using a variety of data points including social media activities of the individuals, background checks, etc.

For instance, some credit rating agencies in the country are using digital data to improve the quality of their credit reports. While the former is tracking the transactions made by the individuals and verifies their locations through their digital footprints, the latter is using Big Data to determine the creditworthiness of the individuals.

10 years ago, credit rating agencies had limited tools and reservoirs of data to tap into for the credit score calculation.

4. Tougher Rules for Defaulters

For years, regulators and market participants were complaining that many Indian credit rating agencies were slow to adjust credit ratings of some businesses that defaulted. However, in 2016, Sebi i.e. Securities and Exchange Board of India decided to tighten the rules for an improved regulation and released new guidelines.

In the new guidelines, Sebi has asked the agencies to continuously monitor the debt issuers as to whether they are meeting the payments. Plus, they are to request monthly "no default statements" from the issuers. There are many other aspects covered as well which have made the credit score calculation more accurate lately.


All in all, it's safe to say that credit rating system has gone through a great number of changes in the past 10 years. So, if the last time you had to apply for a personal loan or a credit card was years back, then perhaps it's better to inform yourself of these changes first.

Fortunately, some things haven't changed. For instance, the requirements for building a good credit score are still pretty much the same. These are- paying your credit card bills in full and on time every time, keeping credit utilization low, checking your credit report for discrepancies, etc. So, it's not that hard to keep your credit score in a good health after all.



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