While applying for a loan, you often come across two commonly used terms - credit score and CIBIL score. These two terms are usually used interchangeably and considered the same. But is credit score and CIBIL score same? No! Credit score is a 3-digit numeric value that determines your creditworthiness. CIBIL score is a value generated by CIBIL, a credit rating agency. Credit and CIBIL scores adhere to the same principle: higher scores indicate better creditworthiness and lower risk for lenders. Keep reading to understand the critical difference between credit score and CIBIL score, their importance and tips to improve the scores.
What is a Credit Score?
The credit score is a 3-digit numerical value assigned to an individual to signify their creditworthiness. It reflects a borrower's credit history and repayment patterns and indicates one’s general financial behaviour and responsibility. The score ranges between 300 and 900. Lenders refer to this score to assess the risk associated with lending money.
What is a CIBIL Score?
CIBIL (Credit Information Bureau (India) Limited) is one of the four India’s leading credit rating agencies that collects and maintains credit information of individuals and even businesses. The credit score generated by CIBIL is known as the CIBIL score. Most of the financial institutions prefer CIBIL score.
Key Difference between Credit Score and CIBIL Score
The key difference between credit score and CIBIL score are mentioned below:
| Parameters |
Credit Score | CIBIL Score |
Calculation Algorithm | Credit scores may slightly vary between different credit rating agencies and their algorithm.
| CIBIL scores do not vary in that context. The credit score is calculated by the CIBIL’s algorithm based on individual’s data. |
Score Eligibility
|
Credit scores are generic, referred to globally and can be computed by various rating agencies across different countries. |
CIBIL score is specific to India. It is widely used by lenders/financiers within the country to evaluate a loan applicant’s creditworthiness. |
Score Range | Credit scores may have various ranges, depending upon the credit rating agency in question. For instance, in the US, FICO scores range between 300 to 850. | CIBIL scores have a fixed range from 300 to 900.
|
ALSO READ :- Difference Between Credit Rating and Credit Score
Tips to Improve CIBIL Score
Here are some tips to improve your CIBIL score:
- Make Timely Payments: Keep your repayment history clear by paying all your bills, EMIs, and credit card dues on time. This will positively impact your credit score. To stay on track, you can set reminders or even automate the payments!
- Manage Your Debt Optimally: The results of managing your debts responsibly will reflect in your improved creditworthiness. Aim to keep your credit utilisation ratio low by using only a portion of your available credit. Simply avoid maxing out credit cards and pay off outstanding balances as they come.
- Review the Report Regularly - Errors, discrepancies, or fraudulent activities may negatively impact your credit scores. So, be sure to check your credit reports regularly to identify any inaccuracies. If detected, report them to the credit bureau and have them rectified immediately.
- Limit Credit Applications - Multiple credit inquiries within a short span can lower your credit score. Limit credit applications to only those that are necessary. Each application generates a hard inquiry on your credit report, which can have a temporary negative impact.
How to Check Your CIBIL Score?
Here are a few steps you can follow to check your CIBIL score online:
- Step 1: Find the ‘Get Your CIBIL’ button and click on it. Select your employment type and gender within the CIBIL Check form.
- Step 2: Enter your name and contact details. You must also provide your PAN card number and necessary address proof.
- Step 3: Check to see if you understand and agree with the terms and conditions before selecting the ‘Agree’ option. Proceed to click ‘Submit’.
To Conclude
Credit score and CIBIL score are terms used interchangeably in
most cases. Though they are not similar, both are important when
opting for a loan. Understanding the difference between credit score
and CIBIL score will help you in loan approvals. While credit scores
have a global application, CIBIL scores specifically refer to credit
scores calculated by the CIBIL agency in India. Both scores are
crucial for lenders in evaluating creditworthiness and determining
loan approvals.
Poonawalla Fincorp, with its diverse loan
offerings, understands the importance of creditworthiness in the
lending process. Hence, we provide tailored loan solutions to help
you achieve your financial goals seamlessly!
Frequently Asked Questions
1. Why is Credit Score Important?
A good credit score or CIBIL score increases the chances of your
loan approval. Higher scores indicate the responsible financial
behaviour of the applicant.
2. What are the 4 credit bureaus in India?
Experian, TransUnion CIBIL, CRIF
Highmark, and Equifax are the four credit bureaus in India.
3. Which credit score is used for loans?
In India, most financial institutions prefer CIBIL scores for
extending credit.