BTL 813 - Credit Scoring – Revised Norms (2025)

 

The Banking Tutor’s Lessons

BTL 813                                                                   12-08-2025

Credit Scoring – Revised Norms (2025) 

Vide Master Direction dated 6^th January, 2025, RBI advised changes to credit scoring and reporting, aiming for greater transparency and accuracy. Key changes are furnished hereunder. 

1. More Frequent (Faster) Credit Score Updates: Credit bureaus now update credit scores every 15 days, instead of monthly. This ensures that changes in your credit behaviour, such as timely repayments, are reflected more quickly. Lenders are also required to report credit activity more frequently, enabling faster updates. 

2. Enhanced Transparency in Loan Applications: Lenders must explicitly state if a loan or credit card application is rejected due to the CIBIL score. This allows borrowers to understand the reason for rejection and potentially address any issues with their credit report. There's also a 30-day window to rectify errors on the credit report before the lender can proceed with the application. 

3. Improved Access to Credit Reports: Borrowers are entitled to one free credit report annually from each credit bureau. They will also receive SMS or email notifications whenever someone accesses their credit report.  This transparency helps borrowers monitor their credit health and identify any discrepancies. 

4. Protection from EMI bounce penalties:  A single bounced EMI won't immediately impact your score; lenders are now required to provide a 30-day notice before reporting it to credit bureaus.

5. Real-time Risk Assessment: Lenders now assess real-time borrower risk, meaning they consider the latest information when evaluating loan applications. This includes factors like recent repayment behaviour, current credit utilization, and the types of credit held. This shift towards real-time risk assessment is intended to provide a more accurate picture of a borrower's creditworthiness. 

6. Human Review for Loan Decisions: Automatic rejections based solely on a low credit score are no longer permitted. A real person must review the application before a final decision is made. This ensures that borrowers are not unfairly penalized for minor issues and that their overall financial situation is considered. 

7. Standardization of credit scores: All Credit Information Companies (CICs) must follow a uniform scoring model with a range of 300 to 900, making it easier to interpret creditworthiness. 

8. Unique borrower identification:  The RBI is exploring a mandatory unique borrower identification number to minimize credit report inaccuracies and discrepancies caused by mismatches in personal details or duplication of records. 

9. Free credit reports: You are entitled to one free credit report per calendar year from each credit bureau.   

These revised norms are designed to empower borrowers, improve the accuracy of credit scores, and promote a more transparent and efficient credit ecosystem. 

Sekhar Pariti

+91 9440641014