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Tata Capital > Blog > Difference Between CIBIL Score and Credit Score

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Difference Between CIBIL Score and Credit Score

Difference Between CIBIL Score and Credit Score

Two terms often emerge interchangeably in conversations about creditworthiness and financial well-being: CIBIL score and credit score. While these numerical indicators seem similar at first glance, they are distinct metrics that significantly impact your financial health.

In this blog, we’ll dive into the differences between CIBIL score and credit score and why you must maintain a good score.

What is a CIBIL score?

CIBIL is an abbreviation for Credit Information Bureau (India) Limited. It’s one of the four primary credit bureaus authorised by the RBI. A CIBIL score refers to the score calculated by CIBIL.

It is one of the components in the CIBIL credit report and is calculated based on details in the “Account Information” and “Equity Information” sections. The CIBIL score ranges between 300-900.

Lenders perceive you as a highly favourable applicant if your score is close to the upper limit. This instils greater confidence in them to grant you loans, as you have consistently fulfilled repayment obligations without default.

What is a Credit Score?

A credit score represents your creditworthiness. It ranges between 300 and 850. This score reflects how likely you are to repay your debts on time. Credit rating agencies consider several factors like credit history, payment history, and credit utilisation to calculate your credit score.

It helps lenders evaluate your ability to manage debt responsibly. A higher credit score indicates a lower credit risk and can lead to better credit card and loan terms.

Difference between the CIBIL score and credit score

Point of DistinctionCredit ScoreCIBIL Score
Who calculates it?The credit score is calculated by credit-rating agencies such as CIBIL TransUnion, Experian, CRIF High Mark, and Equifax.TransUnion CIBIL calculates the CIBIL score.
What is it based on?It is based on several factors, such as your payment history, length of credit, and new credit accounts.It is determined using your credit history given to CIBIL by various credit institutions.
What is the range?It ranges from 300-850It ranges from 300-900

Importance of maintaining a good score

Besides facilitating quick loan approvals, a high credit score offers many valuable benefits. These include:

#1. Longer loan tenure

Longer loan tenures are usually a high risk to the lender. However, a high credit score improves your chances of getting approval for a longer tenure. Plus, a longer loan tenure means smaller EMI payments, which you can manage comfortably.

#2. Higher loan credit

With a high credit score, you can easily be eligible for higher limits on your loans and credit cards. This is because a high credit score represents your responsible credit behaviour.

#3. Interest rates

Another reason to maintain a high score is to get attractive interest rates. When you have a good credit score, lenders will give you a comparatively lower interest rate for availing credit, like personal loans, home loans, etc.

To end

Credit agencies calculate your credit score based on your borrowing and liability history. This makes it essential to verify for any inaccuracies or errors that could impact your score. Hence, regularly monitoring your credit profile can help improve it over time.

Visit the Tata Capital Moneyfy website  to check your credit score for free. 

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