Ever since the onset of the pandemic, more and more lenders have switched over to digital, mobile app-enabled digital lending strategies. As a result, the credit landscape has evolved at an alarming rate these past two years.
With this massive digital growth, credit institutions such as CIBIL have started relying on more than just your loan and credit card history while determining your credit score. Now, even your digital footprint plays a role in ascertaining your capability to repay loans.
Let’s unravel what a digital footprint is and how it impacts your CIBIL score.
What is digital footprint data?
Digital footprint data refers to a unique set of traceable digital activities while surfing the internet. This includes social media profiles, purchase history, website cookies, email addresses, etc. In simple words, it is the data left behind after you have been online. There are two types of digital footprints.
- Active footprint – refers to user’s activities such as watching a video, posting on social media, etc.
- Passive footprint – refers to the data stored in the user’s browser in the form of cookies, etc.
Your credit score is still one of the most reliable indicators of your creditworthiness. But with identity theft on the rise, fraudsters tend to digitally imitate people with a good credit score and avail loan amounts under fake IDs.
This is where digital footprint data can come in handy. By studying one’s digital footprints, alongside performing a CIBIL score check, lending institutions can ensure security by distinguishing genuine applicants from fraudulent ones. Moreover, access to digital footprint data has opened up new avenues for credit analysis for lenders and here is how.
Impact of digital footprints on your CIBIL score
- Reaching out to the financially uninitiated
Here, we are mainly talking about most youth and students, who usually have no financial or credit history to prove their ability to repay loans. With the added perspective from a borrower’s digital footprint, lenders can now determine the creditworthiness of loan applicants, even those who’ve had minimal dealings with credit in the past.
- Determine willingness to repay instead of the ability to repay
Financial institutions study a potential borrower’s social behaviour based on the websites they visit and their online activity. This data helps lenders understand the applicant’s behaviour patterns, and once analysed and mined using advanced tools, predict their probability of default. A potential borrower with a sub-par credit score, but a desire to pay, stands a good chance of obtaining a loan.
Nonetheless, you should still know where you stand in the credit landscape using a CIBIL score check before applying for a loan.
- Enhance customer experience
Some borrowers might have experienced a drop in their credit score due to a financially low point in their life, such as the pandemic. Earlier, such financially stricken candidates may have had their loan applications rejected due to their faltering monetary stability.
However, with digital footprint data in the picture, lenders can now determine creditworthiness and disburse a loan to such applicants, even if they have a poor financial history.
Traditional credit scoring techniques will always be relevant no matter what. But with access to ethical digital footprint data, lenders can improve their decision-making process, in turn increasing your chances of obtaining a loan.
Besides, you can now perform CIBIL score checks free of cost online, which makes soft credit enquiries a lot easier.