Since the start of the pandemic, more and more lenders have moved to mobile-enabled digital lending strategies. As a result, the credit landscape has evolved at an alarming rate over the past two years.
With this massive digital growth, lending institutions like CIBIL have started to rely on more than your loan and credit card history to determine your credit score. Now, even your digital footprint plays a role in determining your ability to repay loans.
Let's find out what a digital fingerprint is and its impact on your CIBIL score.
Digital fingerprint data refers to a unique set of traceable digital activities while browsing the Internet. This includes social media profiles, purchase history, website cookies, email addresses, etc. Simply put, it is the data left behind after you log in. There are two types of digital fingerprints.
Your credit score is still one of the most reliable indicators of your creditworthiness. But with the increase in identity theft, fraudsters tend to digitally impersonate people with good credit and use loan amounts under fake IDs.
This is where digital fingerprint data can come in handy. By studying its digital fingerprints and performing a CIBIL score check, credit institutions can guarantee security by distinguishing genuine candidates from fraudsters. Additionally, access to digital fingerprint data has opened up new avenues for credit analysis for lenders and here's how.
Here we are mainly talking about most young people and students, who generally do not have a financial or credit history to prove their ability to repay loans. With the added perspective of a borrower's digital footprint, lenders can now determine the creditworthiness of loan applicants, even those who have had little credit dealings in the past.
Financial institutions study the social behavior of a potential borrower based on the websites they visit and their online activity. This data helps lenders understand applicant behavior patterns and, when analyzed and mined using advanced tools, predict their likelihood of default. A potential borrower with a subpar credit rating but the desire to pay has a good chance of getting a loan.
Nevertheless, you should always know where you stand in the credit landscape by using a CIBIL score check before applying for a loan.
Some borrowers may have suffered a drop in their credit rating due to a financial low point in their life, such as the pandemic. Previously, these applicants in financial difficulty may have had their loan applications rejected due to their shaky monetary stability.
However, with digital fingerprint data in the picture, lenders can now determine creditworthiness and disburse a loan to these applicants, even if they have poor financial histories.
Traditional credit scoring techniques will always be relevant no matter what. But with access to ethical fingerprinting data, lenders can improve their decision-making process, increasing your chances of getting a loan.
Additionally, you can now perform CIBIL score checks online for free, making flexible credit applications much easier.
