India's first credit information agency, Credit Information Bureau (India) Ltd (CIBIL) and TransUnion, the third largest credit agency of USA, have introduced a new version of credit score. A credit score enables financial institutions to recognize and classify customers according to their risk profiles. Based on this classification financial institutions decide whether or not to lend to an individual and how much to lend. That is, CIBIL score helps in credit risk management.

According to the new version, a CIBIL TransUnion score of 2.0 will be used to indicate the risk index of individuals having a credit history of less than 6 months. Earlier, those who were given a credit score ‘0', for having a credit history of less than 6 months, will now be provided grades on a risk index which have values ranging from 1 to 5, where 1 would signify consumers with the highest risk of default.

Credit institutions would find the new version helpful because by using this system of grading they will be able to classify new-to-credit consumers as high, average or low risk.

On the other hand, consumers having a credit history of 6 months and more will be provided a CIBIL TransUnion score 2.0, with values ranging from 300 to 900, where 300 signifies the highest possibility of default. Talking on the matter, Mr. Satish Pillai, the Chief operating Officer of CIBIL said that the new scoring model will help lending institutions like banks to improve their asset quality and credit penetration.