The CIBIL score plays a crucial role when applying for loans, and the Reserve Bank of India (RBI) has recently made an important change to the rules regarding credit score updates. From January 1, 2025, customers’ CIBIL scores will be updated every 15 days instead of the current 30 to 45 days. This new rule is set to benefit both customers and financial institutions.
Key Changes:
- Credit Score Update Every 15 Days:
- Currently, CIBIL scores are updated every 30-45 days, but starting January 1, 2025, they will be updated every 15 days. This will help customers who are diligently paying their loans and EMIs, as their improved creditworthiness will be reflected much sooner.
- Benefits to Customers:
- If you’ve recently cleared a loan or paid an EMI, your credit score will reflect these updates faster. This is beneficial when applying for new loans, as the improved score could help you secure better terms and lower interest rates.
- Customers who maintain a good repayment record can quickly benefit from their improved credit score.
- Benefits to Banks:
- Banks and NBFCs will have access to more accurate and up-to-date credit information. This helps in making more informed decisions about who to lend to, thus reducing the chances of defaults and NPAs (non-performing assets).
- It will also help banks to determine interest rates more precisely for each customer, ensuring better risk management.
- Who Might Face Challenges:
- Customers who frequently miss EMI payments or delay credit card payments will face faster consequences, as their credit score will reflect defaults more quickly.
- Borrowers who are unaware of this rule might be caught off guard when their credit score drops rapidly due to late payments.
- Impact on Defaults:
- With credit scores being updated every 15 days, lenders will have an accurate and real-time view of a customer’s repayment behavior. This could lead to a reduction in defaults as borrowers will be more aware of the immediate consequences of missing payments.
- Scheduled Data Updates:
- Credit institutions (CIs) will likely update customer data on the 15th of every month and at the month-end. They may also set their own schedules for updating data with credit information companies (CICs). This will ensure more timely updates and help lenders make better lending decisions.
What is a CIBIL Score?
A CIBIL score is a three-digit number that ranges between 300 and 900, representing your creditworthiness. It is based on your past loans, credit card bill payments, and other financial behavior. A higher score (closer to 900) indicates a better credit profile, making it easier to secure loans at favorable terms.
This new rule from the RBI will help responsible borrowers, encourage better financial habits, and provide banks with more real-time data to make informed lending decisions.
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