If you have taken any form of credit like a loan or a credit card, there’s a good chance you know about credit or CIBIL scores already. But if you haven’t, here’s a quick refresher. A credit score is essentially a summary of your credit history in three digits. And for most financial institutions, it is a reflection of your debt repayment capacity.
Now, you may have heard about the term CIBIL score being used interchangeably with creditrating or score. But did you know that CIBIL score is only one of the ways to measure credit?
If you’re curious about the other ways, here’s all you need to know about them.
First things first-
Additional Read – Know More about the Credit Rating Agencies in India and Their Types
What are the types of credit ratings or scores?
The four licensed types are as follows
- Transunion CIBIL score
- Equifax score
- Experian score
- CRIF Highmark score
And here’s a chart comparing them.
|Parameter||Transunion CIBIL Score||Exquifax Score||Experian Score||CRIF Highmark Score|
|Credit bureau establishment year||Established in 2000||Registered in 2010||Established in 2006 and received the license in 2010||Received the license in 2010|
|Good score specifications||>750||>670||>880||>700|
|Poor score specifications||300-550||300-580||<720||300-500|
|Online credit score available||Yes for free||Available once with every new subscription for free||Yes for free||Yes for free|
|Caters to||Individuals and commercial entities||Individuals and commercial entities||Individuals and commercial entities||Individuals and commercial entities, including retail consumers and microfinance borrowers|
Why do different types of credit scores exist?
There are four credit bureaus licensed by the Reserve bank of India (RBI). And financial institutions send your credit information to all these bureaus to generate a credit report. Each bureau considers the same parameters to generate a credit report: outstanding debts, the period for which you have been taking loans, repayment history, credit mix utilised, debt to income ratio, etc.
Here, the difference lies in the algorithms used to calculate the credit score since each credit bureau gives different weights to the factors. Naturally, depending on the credit bureau your details were sent to, the credit report and the three-digit score reflecting your credit utilisation differs.
However, each of them is equally valid. In fact, it is common to have a difference of up to 60 points between scores given by two different bureaus. What’s more, most lenders also consider your scores from multiple bureaus before granting you credit. Hence, you never have to worry about the difference in scores so long as you manage your credit wisely.
Additional Read – All You Need to Know About CIBIL Score
Over to you
That’s all you need to know about credit ratings and their different types. And if you repay your debts on time, you can be sure you have a credit or CIBIL score that lands you affordable loan offers and exciting credit card deals.
That said, if you want to perform a quick, free credit score check, you can do one through Tata Capital