HELPING YOU GET YOUR CREDIT SCORE RIGHT, FOR YOUR FIRST LOAN
NEW DELHI: When Richa Singh applied for a credit card with HDFC Bank last month, all she wanted to do was to buy a work station worth `50,000 on equated monthly installments (EMIs). But she was in for a shock when the bank issued her a credit card, but refused to allow her the EMI option.
This, despite the fact that Singh is a salaried employee with one of India’s largest-selling newspapers.
Singh has never taken a loan before, and did not use her credit card even once — the reason why she does not have a credit score, a metric used by banks to assess the risks of lending to a borrower.
A number of first-time borrowers like Singh find it difficult to get a loan because of the absence of a credit score. But not anymore.
Companies such as Indialends, CreditMantri and Rubique — also known as credit facilitators — are bringing together borrowers and lenders through their marketplace model.
“Around 90% of loan applications in India are rejected for the want of more information about the borrower and this is where we come in,” says Gaurav Chopra, co-founder of Indialends. THE DATA Anyone who takes a loan in India can get her/his credit score from CIBIL, Equifax, Experian or CRIF High Mark. These four credit information companies (CICs) get the information, including loans taken and repayments made by borrowers from banks, and then build credit reports.
“But there is a lot of information, such as social and telecom data, which these CICs do not capture,” says Chopra, who along with Mayank Kachhwaha founded Indialends in 2015.
Social and telecom data means information from LinkedIn profiles and the kind of device used by the user. And that’s not all. “We start from search queries itself that a person uses on Google,” says Chopra. Indialends uses over 1,000 such data points. CreditMantri uses 1,500.
The data is then crunched by statisticians to provide insights. Did you know, staying with parents and having a salaried job actually makes you more credit worthy? THE LOAN The writer tried getting a loan on CreditMantri. Using a monthly salary of `35,000, work experience of two years and parent-owned residence, the writer was offered a `25,000 personal loan to be paid back in six EMIs of `4,600 through Shriram Finance. Shriram Finance is one of the 30 lenders with whom CreditMantri has a tie-up.
Loan offers will vary depending on the data you feed in.
Once the loan is disbursed, it is over to the lenders. “It is not our job to coerce the borrowers to pay their installments,” says Gowri T Mukherjee, CMO, CreditMantri, which she cofounded in 2012.
Getting a loan is free of cost on both Indialends and CreditMantri. These companies earn through commissions charged from lenders on each loan. “Commissions can vary from 0.2-0.35% on a home loan to up to 1% on a personal loan,” says Ranjit Punja, CEO and cofounder, CreditMantri.
Even though lenders can use their own websites to offer such loans, most prefer using these portals since it helps attarct more borrowers and hasten the loan process on better terms, says Punja. Meanwhile, CreditVidya has tied up directly with banks, who in turn use its data and analysis to make lending decisions. Abhishek Agarwal, co-founder and CEO, says lenders are clueless when they do not have a credit report, which is usually the case for a new borrower.
The process does not end with the loan. “The idea is to tell customers what the bank knows about them,” says Chopra.
It starts off with accessing a user’s credit report from one of the CICs. “We analyse the credit report and help borrowers improve scores,” says Punja.
Credit scores, which range from 300 to 900, can go haywire if you have forgotten to pay an old credit card bill. THE WAY AHEAD The CICs are taking note. Experian has started providing temporary credit scores — ‘new to credit (NTC) score’ to help new borrowers get a loan, and then get a formal credit score, says Mohan Jayaraman, MD, Experian India.
Kalpana Pandey, CEO of CRIF High Mark, says the model used by credit facilitators is only a technological intervention. CRIF High Mark also provides a NTC score. But there’s the other side. CreditVidya’s Agarwal says lenders have started looking at alternative data. CreditVidya aims to reach 1 million customers by March 31, 2017.
Till now, CreditMantri and Indialends have facilitated 400,000 and 100,000 borrowers, respectively.
And in this fight to grab marketshare, it is the borrower who will be the king.