A Brief Overview of The Difference Between Credit Score And CIBIL Score
Borrowers often encounter the terms "credit score" and "credit report" when dealing with financial institutions. You may already be aware that these are important considerations when availing of loans. However, you might be confused whether you need a CIBIL score vs credit score, as they are interchangeably used in many loan documents. This article will give you a better understanding of both these terms and clear your doubts when applying for credit.
What is a Credit Score?
A credit score is a three-digit number that ranges from 300-900 and indicates your creditworthiness to lenders. Various credit bureaus in India keep a constant track on the financial records of all individuals and companies in the country. These agencies analyse and evaluate details such as credit card usage and loans taken. They sum up their findings about individuals and organisations in this score. A score of 750 or more is considered ideal for borrowers.
What is a CIBIL Score?
The credit score given by CIBIL to individuals or organisations is known as the CIBIL score. TransUnion CIBIL Limited is one of India’s premier credit rating agencies, approved by the Reserve Bank of India (RBI). CIBIL, also known as Credit Information Bureau (India) Ltd, collects and stores data about the credit behaviour of different individuals and commercial entities in India, and it uses this data to generate their credit reports and credit scores.
A CIBIL score is a glimpse of your credit history that includes the number of credit accounts you hold, your total debt, credit card bills, credit utilisation ratio, and repayment history. From this description, it is clear that the difference between credit score and CIBIL score lies only in the name of the specific credit rating agency giving the credit score.
CIBIL Report: Your Personal Credit Scorecard
A CIBIL report is a detailed record of a person's borrowing and repayment history. It provides information about loans, credit cards, and how well someone has repaid borrowed money. This report helps banks and lenders determine whether to extend a loan or credit card to that person. The report also includes a CIBIL score, which is a number between 300 to 900 that indicates how trustworthy someone is in repaying money. A higher score means better chances of loan approval, better loan terms, and lower interest rates.
Difference Between CIBIL Score and Credit Score
A CIBIL score is a specific type of credit score generated by the Credit Information Bureau (CIBIL) in India. In contrast, a credit score is a more general term used by other credit bureaus, such as Experian, Equifax, and CRIF High Mark. Both scores measure your creditworthiness and repayment behavior, helping lenders decide your loan eligibility. Let us understand them closely.
| Criteria | Credit Score | CIBIL Score |
|---|---|---|
| Definition | A numerical representation of your creditworthiness. It reflects the risk of lending money and the likelihood you will repay based on past financial behaviour. | A specific type of credit score provided by the Credit Information Bureau (CIBIL) in India. It specifically refers to the credit used by Indian financial institutions. |
| Calculation | Based on your credit history, repayment behaviour, and credit utilisation. | Uses similar methods but is specific to CIBIL, factoring in your credit mix and repayment behaviour. |
| Range | Scores range from 300 to 900, with higher scores reflecting better credit and lower financial risk. | Range from 300 to 900, with a good CIBIL score improving your chances of loan approval and loan eligibility. |
| Credit | Issued by multiple credit bureaus in India and abroad, such as Experian, Equifax, and CRIF High Mark. | Issued exclusively by CIBIL in India, making it a key tool for assessing loan eligibility and credit health. |
| Bureau | It can be obtained from multiple authorised credit bureaus, which are regulated independently in different countries. | CIBIL provides the CIBIL score, which is recognised and used extensively across Indian banks and financial entities. |
| Authority | Each country has its own rules for governing credit scores and credit information bureaus. | In India, CIBIL is authorised by the RBI, ensuring its score aligns with national regulations. |
Conclusion
The above comparison of CIBIL vs credit score should have cleared your doubts regarding their differences and use cases. Essentially, these scores differ only in the credit rating agencies that issue them. While the TransUnion CIBIL score is provided only by CIBIL TransUnion Limited, other credit bureaus in India also give their own credit scores for both individuals and organisations. Both these scores help lenders determine a borrower’s creditworthiness. A higher score will helps you easily avail loans at competitive interest rates.