RBI's Game-Changing Rules: Credit Scores Now Updated Every 15 Days – What You Need to Know!
Credit Score is very important factor in determining the eligibility of the borrower. Generally, the credit score is a three digit number computed by CIBIL. It falls in the range of 300-900. 750 is the minimum eligibility for lenders to consider issuing loan to the borrowers. If your credit score is below 700, most banks would refuse to sanction loans and would reject your loan application.
In India, RBI has approved 4 agencies to compute the credit score. It includes CIBIL, Experian, Equifax, and Highmark. One of the main reasons for the fall in credit score is the delay in repayment of loans and the delayed updating of loans settled. In order to ensure transparency and avoid confusion, RBI has been periodically updating their rules with regards to credit score
Credit Score to be updated every 15 days
According to the RBI’s new rule, customers’ credit scores will be updated every 15 days. This rule will be effective from January 1, 2025. RBI has mandated that banks and financial institutions should update their credit score as soon as possible. They will then have to relay the data to credit information companies or credit bureaus every couple of weeks. Information gained by the CIC will be used to compute the credit score and the users can learn about their updated credit score
From now on, the CIBIL score of all customers will be updated every 15 days. CIC may adopt a fixed date according to their convenience for updating the data at intervals of every 15 days.
With the latest information, the banks and NBFCs would be able to make better decisions on whom to lend and whom not to. In the event, a customer defaults, it will be updated within 15 days.
Mandatory Customer Notification
Banks and NBFCs must inform whenever they access their credit reports. They can provide that through SMS or email.
Reason for Rejection must be provided
If a customer’s request is denied, the institution must communicate the reason as to what factor contributed to rejection. Credit institutions are required to furnish the list of reasons that are grounds for rejection
Annual Free Credit Report
Every credit company must offer customers access to full credit report atleast once a year. A dedicated link must be displayed on the website allowing customers to access their credit history and credit score
Advance Notification Before Reporting Default
Lenders are duly obligated to inform the customers about their non-payment before reporting them as defaulters. This should clearly be communicated through email or SMS. Banks must also designate nodal officers to address all kinds of issues related to credit score
Complaint resolution and penalty
Credit companies must resolve customer complaints within 30 days. Failure to do so will attract a penalty of Rs. 100 each day after the deadline. The process is divided into two parts: Banks have 21 days to customer complaints and credit companies have 9 days beyond which they are liable to pay the penalty charges
Improve credit score
The latest RBI notifications are ensured keeping customer interests in mind and to limit bad loans and NPA. Therefore, all the lenders must comply with the rules and it would in fact make their job much easier in determining the loan eligibility of the user. As for the customer, they could know the updated credit score every 15 days and they can report if they find notice any discrepancy.
Conclusion
The current change in the credit score guidelines by the Reserve Bank of India is a step forwards to increase transparency and customer responsibility in the credit markets. RBI also provides for fair and customer friendly policies through this bi- weekly credit score update announcement, annual free credit reports and clear message regarding rejected loan applications. These measures do not only empower the borrowers and ensure they are aware of their credit status but also helps the credit lenders to make better decisions on whom to grant credit to. Since customers use credit responsibly and lenders follow these new guidelines, the financial system is expected to experience a positive change, thereby ensuring that trust and economic growth is achieved.