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What is the Difference Between Credit Score and CIBIL Score?
20 June 2022
Have you ever applied for a loan or plan to apply for one? Then you’re probably familiar with the phrases ‘Credit Score’ and ‘CIBIL Score’. Financial institutions use them to gauge your creditworthiness as a potential borrower. Let us assess credit score vs CIBIL score in this article and understand the difference between credit and CIBIL scores. Read on!
What is a Credit Score?
A credit score represents the creditworthiness of a potential borrower. It is calculated by taking into account your credit history, which includes:
Number of credit accounts
Amount of credit inquiries for loans or credit cards
Lenders utilize this score as a part of their internal criteria to portray the likelihood of the borrower repaying the debt on schedule. The higher the credit score, the more the chances for your loan or credit card approval. A Credit score also sets the lender’s benchmark to fix the interest rate on your loan. The ideal score should be at least 700.
What is CIBIL Score?
CIBIL stands forCredit Information Bureau (India) Limited. CIBIL is a credit score provided by TransUnion CIBIL, one of India’s leading credit agencies that keep track of companies’ and individuals’ credit dealings.
With the help of credit information collected from three divisions (Consumer Bureau, Business Bureau, and Micro Finance Institution Bureau), CIBIL furnishes Credit Information Reports (CIR) and CIBIL Scores for people. CIBIL also generates CIBIL Commercial Reports and CIBIL Ranks meant for commercial operations.
List of Major Credit Bureaus in India
Banks and NBFCs cannot preserve any such records, so government-appointed credit bureaus keep such records to assist lenders in making these judgments. The Reserve Bank of India has granted a license to a few qualified credit bureaus to collect and maintain data on the credit behaviour of individuals and businesses in India. India’s top three credit bureaus are:
In 2000, Transunion CIBIL launched Credit bureau services in India (Consumer Bureau). CIBIL collects and maintains credit information on over 1000 million individuals and businesses. The Majority of banks, financial institutions, home finance businesses, and non-banking financial companies (NBFCs) are CIBIL members in India.
Equifax was established in 2010 as a credit reporting company. Equifax India is a joint undertaking between Equifax Inc. of the United States and seven of India’s top financial institutions, including State Bank of India, Union Bank of India, Kotak Mahindra Prime Ltd, Bank of India, Sundaram Finance Limited, Bank of Baroda, and Religare Finvest Ltd.
Experian India offers a credit report and credit score on its own that both people and businesses may use. Individuals and businesses can use its information, marketing services, and analytical tools to make informed credit decisions. Experian was the first credit bureau to get a license under the new Credit Information Companies (Regulation) Act or the (CICRA) from 2005, which took effect in 2010.
The CIBIL score is a three-digit numeric summary of a consumer’s credit history that provides a peek into the credit profile of a prospective borrower. It’s a numerical evaluation of the credit history over the last few years. Suppose your credit report indicates responsible financial behavior such as prompt bill payments, regular loan EMI payments, fewer loan applications, and an error-free profile. In that case, it shows that you’ve been honest regarding credit.
The score ranges from 300 to 900. To look for your eligibility for a loan, follow the below range:
800 & above
How to Maintain a Good Credit Score vs CIBIL Score?
To maintain a good credit score, one should be careful about utilizing credit-related transactions. The following factors can help you maintain a good credit score:
EMIs on loans– Always ensure that all your EMIs are paid on time. Any delays create a negative impact on your credit or CIBIL score.
Repayment of credit card bills- Even if you are unable to pay the Total Amount Due by the due date, ensure you pay the Minimum Amount Due to maintain your credit or CIBIL score.
Credit utilization- If your credit utilization exceeds 40% of the total limit on your credit card, it adversely affects your credit or CIBIL score.
Inquiries of credit- The more you inquire about loans or credit cards from financial institutions, the more it depicts you are ‘credit-hungry’. That affects your credit or CIBIL score.
Maintaining a good credit or CIBIL score is crucial if you are looking to take a loan or credit card. While credit scores are scores provided by authorized credit bureaus in India, the CIBIL is a TransUnion score that central banks and financial institutions adopt in India. The scores show your creditworthiness for timely repayments. When you apply for any loan, your credit or CIBIL score is part of the basic checklist for any financial institution to process the application further. If you’re looking for a home or personal loan, you can download the Navi app and apply instantly.
Q1. Can we see our CIBIL score without applying for a loan?
Ans:Yes, you can check your CIBIL score and detailed report online from the CIBIL website after paying a small fee. Some other websites and apps allow you to access your CIBIL score for free.
Q2. Will my CIBIL score vs Credit score change if I pay the minimum amount due on the credit card?
Ans:No, if you pay the minimum amount due on your credit card, your CIBIL or credit score will not be affected.
Q3. What details are required to check the Credit score?
Ans:For checking your Credit or CIBIL score, you need to input your date of birth and PAN. You may also be asked specific questions regarding your existing credit cards and need for credit. Additionally, you may have to provide your phone number or email ID to receive the report.
Q4. Is there any difference between credit and CIBIL scores?
Ans:Yes, a CIBIL score can be different from a credit score. CIBIL is just one of the credit scores that can be obtained from authorized credit bureaus. All agencies have different criteria for judging your creditworthiness.
Q5. How often does the CIBIL score get updated?
Ans:The CIBIL score is updated every month or when there is credit activity noticed.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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