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Tata Capital > Blog > What’s Trending > CIBIL score vs. credit score: A clear comparison

What's Trending

CIBIL score vs. credit score: A clear comparison

CIBIL score vs. credit score: A clear comparison

Credit Information Companies (CICs), also referred to as credit bureaus, are specialized financial institutions that collect and maintain data related to the credit behavior of individuals and commercial entities in India. They use this data to generate credit reports and credit scores of individual borrowers.

Now, let’s understand credit score vs CIBIL score.

Credit score vs CIBIL score: What’s the key difference?

The primary difference between your credit score and CIBIL score is that credit scores can be provided by any of the four credit bureaus in India, while CIBIL scores are only provided by TransUnion CIBIL. Both CIBIL scores and credit scores are equally valid and are used by lenders to assess a borrower’s creditworthiness.

CIBIL score meaning: What is CIBIL & CIBIL score definition?

CIBIL stands for Credit Information Bureau (India) Limited. It is one of India’s four major credit bureaus linked with reputed banks, housing finance companies, and NBFCs. The other three notable bureaus are CRIF Highmark, Equifax, and Experian. All these credit agencies are licensed by the Reserve Bank of India (RBI). And, the credit rating calculated by CIBIL is what the CIBIL score is.

All you need to do to access your CIBIL score is visit the official website of the credit bureau at www.cibil.com. You can get your score for free.

A CIBIL report, also called a Credit Information Report (CIR), is a running record of your credit and loan-related information, which includes your CIBIL score.

Credit score meaning: How are credit scores calculated?

A credit rating represents your creditworthiness as a potential borrower. The score is calculated after considering your credit history, including the total debt, the number of credit accounts, credit card bills, credit utilization information, and repayment history. Besides, the number of credit enquiries for loan or credit card applications is also taken into account while calculating your credit rating.

Having a good mix of secured credit, like home or auto loans, and unsecured credit, like personal loans, in your profile also helps boost your overall credit rating. Ultimately, it is a 3-digit summary between 300 and 900 that reflects your credit history. The credit rating is used to estimate the probability of you repaying any debt on time.

Consequently, the odds of you getting a new credit card or loan increase if you have a high credit rating. Similarly, a lower score can turn lenders away.

Here, it’s crucial to note that a credit score helps gauge your repayment capability as a potential borrower. At the same time, it also helps you bag more competitive interest rates. Typically, in India, most lenders prefer a credit or CIBIL score of 750 or above before granting you a loan.

Difference between CIBIL score and CIBIL report explained

The CIBIL score represents an individual’s creditworthiness, based on the credit history given by the Credit Information Bureau (India) Limited. It ranges from 300 to 900, with higher scores indicating better creditworthiness.

The CIBIL report is a detailed record of an individual’s CIBIL score and history created by the CIBIL. It includes information about past and current credit accounts, repayment behavior, defaults (if any), inquiries made by lenders, etc. In addition to your credit information, it also mentions personal details such as name, address, contact details, PAN details, etc. It also includes any hard inquiries conducted by a lender every time you apply for a loan or credit card.

What is a CIBIL report? Details & sections in your credit information report

The CIBIL report includes six sections:

  1. Credit score: The CIBIL score is calculated based on your credit behavior and is reflected in the ‘Accounts’ and ‘Enquiries’ sections of your CIBIL report. The score ranges from 300 to 900, with a score of 700 considered good.
  2. Personal information: This section includes details such as your name, date of birth, gender, PAN (Permanent Account Number), voter ID number, etc.
  3. Contact details: This section includes contact details like your current and previous addresses, contact numbers, and email addresses.
  4. Employment details: Details about your employment history or your monthly income as reported by the financial institutions may be included.
  5. Credit account details: This is one of the most crucial parts of the report and includes a detailed summary of the credit accounts you hold or have held in the past. It consists of the name of your lender, types of credit facility (like personal loans, car loans, or credit cards), loan amounts, dates of opening and last payment, current balances, and so on.
  6. Inquiries: This section lists all inquiries made by lenders for verification whenever you apply for credit.

What is a CIBIL report? Components & importance explained

The TransUnion CIBIL prepares a detailed report showcasing your financial history and repayment behavior. This report is called the CIBIL report. It comprises information about your personal details, credit accounts, and payment history. It also mentions details about your credit enquiries and CIBIL score.

The report plays an important role in helping lenders assess your creditworthiness before approving loans or credit cards. A good CIBIL report helps secure lower interest rates and better loan terms. It also helps with faster approvals. You must check it periodically to track your credit health and request error rectification, if required.

Why do lenders check both credit score and CIBIL score?

Lenders check both your credit and CIBIL score to get a more reliable and comprehensive view of your credit profile. The TransUnion CIBIL prepares the CIBIL score, while different bureaus prepare the credit score, which can contain additional or updated information. Lenders compare the different scores to assess repayment behavior, identify risks, and reduce the chances of errors. They can make well-informed decisions on loan approvals, interest rates, and loan terms.

Tips to improve your credit score and CIBIL score

Now that you know the difference between a CIBIL score and a credit score, you should try to maintain a high score. 

Here are some quick tips to help you with the same.

  • Have a healthy mix of secured and unsecured credit
  • Pay your credit card bills on time
  • Pay off any pending loans before applying for one
  • Do not apply for multiple loans
  • If your loan application gets rejected, wait a while before applying. Consistent rejections can further harm your credit score.

Conclusion

Through this post, the difference between your credit score and CIBIL score should be clear. Before approaching a lending institution to apply for a new loan, it’s prudent to perform a credit score check. This way, if your credit or CIBIL rating is low, you can take your time to improve it before applying for a loan. Soft inquiries, wherein you check your credit or CIBIL score, don’t negatively impact your score.

To check your credit rating for free, turn to Tata Capital.

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FAQs

What is the difference between a credit score and a CIBIL score?

Different credit bureaus provide the credit score, whereas the CIBIL score is only provided by TransUnion CIBIL. Banks in India often use the CIBIL score for loan decisions.

What is the meaning of the CIBIL score and the CIBIL report?

A CIBIL score is a three-digit number reflecting your creditworthiness. A CIBIL report is a detailed record of your loans, credit cards, repayment history, and defaults, based on information received from lenders.

Is a credit score the same as a CIBIL score?

No, a credit score isn’t the same as a CIBIL score. A CIBIL score is a type of credit score given by TransUnion CIBIL. Bureaus like Experian and Equifax also give credit scores. These may vary slightly from CIBIL because of different data and calculation methods.

What is a good CIBIL score in India for loan approval?

A CIBIL score of 750 or above is considered good in India. It improves your chances of loan approval and helps you get lower interest rates and better loan terms.

How can I check my CIBIL score and get my CIBIL report?

You can check your CIBIL score on the TransUnion CIBIL website or through bank and financial apps. You will need to provide basic details to proceed.

What affects my credit score and CIBIL score?

Your credit score and CIBIL score are affected by your repayment history, credit card usage, and loan amount. The number of active loans, credit enquiries, and the length of credit history also have an impact.

Why do banks look at CIBIL score and credit score separately?

Banks may check CIBIL and other credit scores to get a comprehensive view of your credit behavior. Different bureaus have different data, which helps lenders assess risk more accurately.

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