Credit Information Companies (CICs), also referred to as credit bureaus, are specialised financial institutions that collect and maintain data related to the credit behaviour 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.
Difference Between CIBIL Score And Credit Score?
The only difference between CIBIL and credit scores 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.
What is a CIBIL Score?
CIBIL stands for Credit Information Bureau (India) Limited. CIBIL is one of India’s four major credit bureaus linked with major 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). The credit rating calculated by CIBIL is known as the CIBIL score.
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.
What is a credit score?
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 utilisation 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 300-900 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
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 behaviour, 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 Information is Available in the CIBIL Report?
The CIBIL report includes six sections as follows-
1. Credit score: The CIBIL score is calculated based on your credit behaviour 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 content 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.
How to improve your cibil & credit score?
Now that you know the difference between CIBIL score and credit score, you should maintain a high score. Here are some quick tips:
- 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.
Over to you
Now you know all about the difference between credit score and CIBIL score. 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 like you checking your credit or CIBIL score doesn’t impact your score negatively.
To check your credit rating for free, turn to Tata Capital.
12 July 2024
5 mins read
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