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by 5paisa Research Team Last Updated: 2023-07-14T12:08:23+05:30
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Evaluating one's creditworthiness is a crucial aspect of effective financial management, and two terms that frequently come into play are credit score and CIBIL score. These scores serve as vital indicators for lenders and financial institutions, enabling them to assess the risk associated with providing credit to an individual. However, many individuals find themselves pondering whether credit score and CIBIL score are synonymous or if they possess distinctive characteristics. While both scores are interconnected and reflect an individual's credit health, it is essential to recognize that they are not precisely the same.

In this blog, we will delve into the intricacies of credit score vs CIBIL score and shed light on the factors that set them apart. By gaining a comprehensive understanding of the difference between credit score and CIBIL score, you will be better equipped to navigate the world of credit and make informed financial decisions.

What is a credit score?

Credit score is a number that shows how trustworthy you are as a borrower. It's based on your credit history, which includes things like the amount of debt you have, the number of credit accounts you have, your credit card bills, and your track record of debt repayment. The score also takes into account how often you apply for new loans or credit cards.

If you have a high credit score, it's more likely that you'll be approved for new credit cards or loans. On the other hand, a low score can make lenders hesitant to lend to you. In India, most lenders prefer a credit score of 750 or higher before granting you a loan.
 

What is a CIBIL score?

CIBIL Score or Credit Information Bureau (India) Limited Score, is a credit rating specifically provided by CIBIL, one of India's prominent credit bureaus. CIBIL is among the four major credit bureaus in India, alongside Equifax, CRIF Highmark, and Experian, all of which are licensed by the Reserve Bank of India (RBI). These credit bureaus gather credit-related data from major banks, housing finance companies, and NBFCs.

To access your CIBIL score, you can simply visit the official website of cibil at www.cibil.com, where you can obtain it for free. The CIBIL Score is a three-digit numerical representation of your creditworthiness as a borrower, reflecting your credit history and repayment capability. A higher cibil score indicates lower credit risk, thereby increasing the chances of loan approvals and favorable interest rates.

What Information is Available in the CIBIL Report? (H2)

Before knowing the difference between credit score and cibil score, let's take a look at the information available on the cibil report. The cibil report comprises six sections that provide valuable insights into an individual's credit history and financial standing. These sections include:

1.    Credit score

Credit score is a numerical representation consisting of three digits. CIBIL calculates the credit score based on the information provided in the "Accounts" and "Enquiries" sections of the report. A score above 750 is generally considered good, while a lower score may pose challenges in obtaining credit.

2.    Personal details

This section of the CIBIL report includes personal information like the person's full name, date of birth, gender, PAN (Permanent Account Number) number, and voter's ID.

3.    Contact details

Here, the report lists the person's contact numbers and addresses. It may include multiple numbers and addresses, depending on the information gathered from various financial institutions.

4.    Employment details

This section provides insights into the individual's employment information, specifically their monthly income. Financial institutions report this information to CIBIL, which helps lenders assess the person's financial stability and repayment capacity. 

5.    Account details

The account details section provides a comprehensive summary of the credit facilities that the person has availed of in the past. It includes information such as the names of lenders, types of credit facilities (such as home loans, auto loans, personal loans, overdrafts, etc.), account numbers, ownership particulars, dates of account initiation and most recent payment, loan amounts, current balances, and a month-by-month payment history spanning up to three years.

6.    Inquiry details

This section reports the number of times banks or financial institutions have accessed the person's credit report for verification purposes. Each time a lender or institution makes an inquiry, it is recorded in this section. Multiple inquiries within a short period may indicate a higher credit risk to lenders, while fewer inquiries may suggest a more stable credit profile.
 

Difference Between the CIBIL Score and Credit Score

So, is credit score and CIBIL score same? The table below provides an in-depth analysis of credit score vs cibil score, shedding light on their definitions, calculation methods, score ranges, credit bureau associations, and regulatory authorities.

Criteria

CIBIL Score

Credit Score

Definition

CIBIL score, furnished by the Credit Information Bureau (India) Limited (CIBIL), is a credit score utilized for evaluating an individual's creditworthiness. It represents a numerical evaluation of an individual's credit history and repayment behavior.

Credit score is a numeric depiction that reflects a borrower's creditworthiness. It is determined by credit bureaus and is based on various factors, including payment history, credit utilization, credit history, credit mix, and new credit accounts.

Calculation

The CIBIL Score is calculated using an individual's credit report, which is provided to CIBIL by credit institutions and lenders.

Credit scores are calculated by credit bureaus using different algorithms and scoring models. Different bureaus may use slightly different calculation methods.

Range

The CIBIL Score spans from 300 to 900.

The credit score typically ranges from 300 to 850 or 900, depending on the credit bureau providing the score. The specific range may vary by country and credit bureau.

Credit Bureau

CIBIL is one of the prominent credit bureaus in India and is recognized by banks, financial institutions, and lenders across the country.

Credit bureaus operate globally and vary by country. Examples of well-known credit bureaus include Experian, TransUnion, and others.

Authority

CIBIL is a licensed credit bureau regulated by the Reserve Bank of India (RBI) and follows guidelines and regulations set by the RBI.

Credit bureaus are regulated by the relevant authorities in their respective countries. They adhere to specific laws, regulations, and industry standards to ensure accuracy, privacy, and data protection.

 

Some tips to maintain a good credit score

Now that you have gained a comprehensive understanding of credit score vs CIBIL score, here are some tips to help you maintain a good credit score:

●    Maintain a balanced mix of credit types

Lenders value a balanced mix of credit types. Having a combination of secured credit (such as home or auto loans) and unsecured credit (like personal loans or credit cards) demonstrates your ability to manage different types of debt responsibly. This diverse credit portfolio can positively impact both your credit score and CIBIL score.

●    Pay your credit card bills on time

Payment history is a vital factor in determining your creditworthiness. Consistently paying your credit card bills on time showcases your responsible financial behavior and helps maintain a good credit score. Late or missed payments can have a negative impact on both your credit score and CIBIL score.

●    Pay off any pending loans before applying for new ones

Before applying for a new loan, it is advisable to settle any existing outstanding loans. This proactive approach demonstrates financial responsibility and can improve your creditworthiness. Clearing pending loans positively affects your credit score and contributes to a favorable CIBIL score.

●    Avoid applying for multiple loans simultaneously

Making multiple loan applications within a short period can be viewed negatively by lenders and credit bureaus. It may indicate financial instability and can potentially lower your credit score.

●    Exercise patience after loan rejections

If your loan application gets rejected, avoid immediately applying for another one. Frequent rejections can harm your credit score further. Instead, take the time to analyze the reasons for rejection and work on improving your creditworthiness before applying again.

Conclusion

Understanding the difference between credit score and cibil score is vital for effectively managing your financial health and navigating the world of credit. While both scores serve as indicators of creditworthiness, credit score is a more general term used globally, while cibil score specifically pertains to the credit rating system in India. By keeping a close eye on both your credit score and cibil score, you can make informed decisions when it comes to obtaining credit, securing loans, and enjoying favorable interest rates. 

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Frequently Asked Questions

A good credit score varies among credit-rating agencies, but generally, a credit score above 750 is considered good

In India, most banks prefer CIBIL scores when extending credit. However, multiple credit bureaus issue credit scores, including Equifax, Experian, CRIF High Mark, and CIBIL TransUnion.

To get a 900 credit score, pay bills on time, keep low credit utilization, monitor your credit report, maintain old credit accounts, diversify credit mix, and limit credit inquiries.

Your CIBIL score, like any credit score, does not immediately increase every month and is based on credit records, payment patterns, and other factors.