Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Personal Use Loan > Credit Rating vs. Credit Score: Understanding the Difference

Personal Use Loan

Credit Rating vs. Credit Score: Understanding the Difference

Credit Rating vs. Credit Score: Understanding the Difference

When it comes to understanding your financial credibility, terms like credit rating and credit score are often used interchangeably. However, they’re not the same.

While both reflect how trustworthy you are with borrowed money, they serve different purposes and are used by different entities. A credit score is assigned to individuals, while a credit rating evaluates companies or governments.

If you’re applying for a loan, a credit score matters more. But if you’re investing in corporate bonds, you’ll want to check the credit rating. This article breaks down the difference between credit rating and credit score in simple terms.

Difference Between Credit Score and Credit Rating

1. Credit score vs credit rating: What they are

In simple terms, credit agencies give credit ratings to corporations and even governments after assessing if they can meet their financial commitments. Thus, credit ratings indicate to lenders the entity’s loan repayment ability. Different credit agencies have slightly different methods for calculating credit ratings.

Credit scores, unlike credit ratings, are the individual’s loan repayment ability typically expressed in numbers. But just like credit ratings, different organizations offer credit scores to individuals based on their calculation methods.

If “what is the difference between credit score and credit rating” isn’t clear yet, perhaps the next point will come to your aid.

2. Credit score vs credit rating: How they are determined

Credit agencies like CRISIL, ICRA, Fitch, CARE and ONICRA give entities credit ratings based on their financial statements, borrowing and lending behaviour and credentials. They offer two types of credit ratings – speculative and investment-grade credit ratings.

Speculative credit ratings are offered to people or organizations making high-risk transactions. But investment grade credit ratings, on the other hand, are handed out to individuals making solid investments and are likely to repay the dues on time.

On the other hand, credit agencies determine credit scores after considering an individual’s credit history, new credit acquired, the mix of credit types, and more. Unlike credit ratings, credit scores are calculated the same way, no matter the type of investment. Only the nature of scoring depends on the credit agency calculating your credit score.

Thus, how the values for the credit score and credit rating are determined is one of the major differences between credit rating and credit score.

3. Credit rating vs credit score: What are the limits

Credit ratings are typically defined on a limited rating scale. In India, they are expressed in a letter-grade format. The highest rating is AAA, followed by AA, A, BBB, BB, B, all the way until D or default. Some credit agencies also add + or – to the ratings instead of repeating the letters. Naturally, the highest credit rating on a credit scale is AAA, while D is the lowest.

Credit scores, in contrast, are typically expressed numerically on a scale starting from 300 going all the way up to 900. The greater the numerical value, the higher the creditworthiness of the individual.

Looking for more differences between credit score and credit rating? Perhaps, the following pointer will help you with it.

4. Credit rating vs credit score: How to increase it

Whether you have a credit rating of C or a credit score of 500, you can increase them over time. The way to do it is by maintaining a good credit history and improving creditworthiness. Let us first see how you can boost your credit rating and increase your credit score individually.

Since the credit rating represents the creditworthiness of an entity, maintaining a stable credit history is a good way to increase it. So, pay off the business bills on time, lower your credit balance by paying off your debts, pay the business loan EMIs on time, and remember to keep your old business credit cards active to add to your credit history. Doing all of this will boost the credit rating over time.

Blurring the difference between credit score and credit rating further, increasing the credit score is similar to increasing credit rating. One can focus on maintaining good credit behaviour and expect their credit score to grow over time. Paying off unpaid credit card bills, keeping debts to a minimum, repaying outstanding loans on time, and checking the credit report periodically for errors, can all increase your credit score over time.

Also, read – Factor Affecting Working Capital Requirements

What Are Credit Rating Agencies in India? 

As explored above, credit rating meaning refers to an independent evaluation of an entity’s ability to repay its obligations. The credit rating process involves a detailed analysis of financial statements, business risks, management quality, and industry conditions before assigning a grade, which is done by Credit rating agencies in India. 

The role of rating agencies is to help lenders, investors, and regulators make informed decisions while maintaining transparency in the debt market. In India, the major credit rating agencies are CRISIL, ICRA, CARE Ratings, Fitch Ratings India, and India Ratings and Research.

Also, read – Multi-Purpose Loan

Top Agencies: CRISIL, ICRA, CARE, Fitch, India Ratings 

Different credit rating agencies in India strengthen the debt market by offering reliable, transparent, and comparable credit evaluations. 

  • CRISIL ratings are widely used by banks and investors to gauge corporate and infrastructure creditworthiness. 
  • ICRA ratings offer independent assessments across sectors, supporting risk management. 
  • CARE Ratings India focuses on manufacturing, SMEs, and financial institutions. 
  • Fitch Ratings India, part of the global Fitch Group, evaluates Indian corporates using international benchmarks. 
  • India Ratings and Research, a Fitch subsidiary, provides detailed ratings for banks, NBFCs, and structured finance products. 

Also Read – What is CKYC

What Are Credit Bureaus in India? 

Credit bureaus in India maintain and update consumer credit information collected from banks, NBFCs, and lenders. A credit bureau meaning refers to an institution that tracks an individual’s repayment history and assigns a credit score. These credit score agencies in India help lenders assess borrower risk and determine loan eligibility, interest rates, and approval amounts. The role of credit bureaus is crucial in promoting responsible lending and supporting financial discipline. India’s major credit bureaus include CIBIL, Experian, Equifax, and CRIF High Mark.

Top Bureaus: CIBIL, Experian, Equifax, CRIF High Mark 

The leading bureaus in India include: CIBIL bureau, Experian India, Equifax India, and CRIF High Mark. These organisations provide essential credit score reporting in India, helping lenders judge borrower reliability. 

CIBIL bureau is India’s most widely used consumer credit scoring agency. Experian India is known for its comprehensive and detailed credit reports. Equifax India specialises in tracking both individual and MSME credit data. CRIF High Mark is recognised for the CRIF High Mark score and its advanced analytics capabilities. 

Also, read – Business Acquisition Loan

When Does Credit Score Matter vs When Does Credit Rating Matter?

The credit score vs credit rating distinction lies in their purpose and users. 

A credit score matters when individuals apply for personal loans, credit cards, home loans, or any retail credit product. It reflects personal repayment behaviour and influences approval decisions and interest rates. On the other hand, a credit rating matters when companies, banks, or governments raise funds through bonds or borrow large sums. 

Basically, the difference between credit score and rating is simple: scores assess individuals, while ratings assess institutions and debt instruments. Understanding credit rating vs credit score helps consumers and businesses make smarter borrowing decisions and avoid costly financial mistakes.

Also, read – What is Credit Appraisal

Common Myths About Credit Score and Credit Rating 

Let’s bust some credit rating vs credit score myths. Firstly, checking your own score does not reduce it. Having no loans doesn’t guarantee a high score. Many believe closing old accounts boosts scores, but it may actually lower credit history length.

Similarly, credit rating myths include assuming ratings never change or that they guarantee repayment. Ratings only indicate risk levels, not certainty. Common misconceptions about credit score and credit rating mistakes often arise from unclear distinctions between personal scoring models and institutional credit evaluation. 

Ultimately, knowing the difference between credit rating and credit score ensures you use the right metric for the right purpose; personal loans, business borrowing, or long-term financial planning.

Also, read – What is Outstanding Loan Amount

Key Differences: Credit Rating vs. Credit Score

So, what is credit rating and what is credit score? What is the difference between a credit score and a credit rating? The following table answers these questions.

AspectCredit ScoreCredit Rating
PurposeUsed by individuals to get loans or credit cards and determine applicable interest rates.Helps investors and lenders assess the risk of lending to or investing in a company or government.
Frequency of ChangeChanges often based on credit activity like payments, utilisation, or new accounts.Reviewed less frequently, usually yearly or when a major financial event affects the entity.
GranularityOffers detailed insights into personal credit behaviour, including repayment history and credit inquiries.Gives an overall view of a company’s or government’s financial health, based on various qualitative and quantitative factors.
AccessibilityIndividuals can check their scores via credit reports or monitoring services, often free or via subscriptions.Publicly accessible via financial media or credit rating agency websites like CRISIL, ICRA, or S&P.
Influence on InvestmentImpacts personal finance and borrowing terms.Heavily influences investment choices, especially for bonds, mutual funds, and other instruments tied to government or corporate debt.

Conclusion

The above table should give a clear answer to the question – “what is the difference between credit score and credit rating”. Now that you know it, you can confidently keep track of your credit history and maintain a high credit rating or score.If you’re looking to get a loan in the meanwhile for personal reasons, you can turn to Tata Capital. We offer personal loan at terms convenient to you. Visit our website to learn more.

Apply For Personal Loan

Get an Instant Personal Loan for all your needs !

Apply now
Popular Searches
Term Loan Personal Loan for Government Employee Personal Loan for Salaried What is Personal Loan Personal Loan Prepayment Personal Loan Application Process 3 Lakh Personal Loan 4 Lakh Personal Loan 6 Lakh Personal Loan 7 Lakh Personal Loan 8 Lakh Personal Loan 9 Lakh Personal Loan
More About Loans
Instant Personal Loan personal loan emi calculator personal loan interest rate personal loan eligibility Marriage Loan Document Required for Personal Loan Home Renovation Loan Medical Loan Personal Loan Balance Transfer 5 Lakh Personal Loan Small Personal Loan Travel Loan Personal Loan for Women 2 Lakh Personal Loan 10 Lakh Personal Loan

FAQs

How Do I Improve My Credit Score?

You can improve your credit score by paying bills on time, reducing credit card balances, avoiding unnecessary loans, and regularly monitoring your credit report for errors.

Does Checking Your Credit Report Affect Your Credit Score?

No, checking your own credit report is a soft inquiry and does not impact your credit score. It’s a good practice to review it regularly for accuracy.

Does Opening New Credit Affect Your Credit Score?

Yes, applying for new credit triggers a hard inquiry, which may slightly lower your score temporarily. Too many applications in a short time can impact it further.

How can a business enhance its credit rating?

To enhance its credit rating, a business should maintain timely repayments, reduce outstanding debt, maintain healthy financials, and build positive relationships with lenders. This will improve the business’s overall creditworthiness and credit rating.

Are there different types of credit scores and ratings?

Yes, individuals have credit scores from bureaus like CIBIL or Experian, while businesses and governments receive credit ratings from agencies like CRISIL, ICRA, or S&P.

What distinguishes a credit score from a credit rating most fundamentally?

A credit score applies to individuals and reflects personal credit behaviour, while a credit rating evaluates the credit risk of businesses or governments on a broader financial scale.
Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download