Difference Between Credit Score and CIBIL Score

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What is a Credit Score?

After getting a loan, you need to repay it in a specific time frame. It's important to see how well you are managing and repaying it. A credit score is a 3-digit number that literally shows your debt repayment behaviour in the past. When you go for a loan in the future. Banks evaluate your creditworthiness by looking at your credit score. If your credit score is high, your chances of getting a loan increase.

Which are RBI-Approved Credit Bureaus in India?

Credit information companies are those companies that collect and maintain customer's loans and data. Then these companies generate credit score reports. In India, there are four Credit Information Companies (CICs). The Reserve Bank of India (RBI) has licensed them. 

Those companies are:

• TransUnion CIBIL
• Experian
• Equifax
• CRIF High Mark

The CIBIL Score is from 300 to 900. If you have a higher number, then it shows better creditworthiness. 

If you never took out a loan or used a credit card, you may not have a credit score. 

How Does Credit Impact Your Loan & Credit Card Approvals?

As I mentioned before, credit history plays a very important role in your future loan application. Credit history gives an idea about your responsible behaviour to the bank. If you have good credit history, it can increase the chances of getting a loan. Here is how your credit history affects your loan approval.

• If your credit score is 750 or more than this, you are more likely to get a loan.
• It shows that you have paid bills and EMIs on time previously.
• This score isn't fixed for every lender. It varies.
• Your strong credit history can also speed up the loan approval process.
• One of the biggest benefits of keeping a good credit history is that you can get the next loan at a lower interest rate. 

This is how your credit history can affect your future loans; that's why it's important to pay bills and EMIs on time. 

What is a CIBIL score? 

CIBIL score is also similar to a credit score. It is also used to show your past repayment behaviour and how well you have managed all your credit cards and loans. Banks and financial institutions use this too for measuring the creditworthiness of borrowers. 

CIBIL score is issued by TransUnion CIBIL and ranges from 300 to 900. If you have a high CIBIL score, it shows you have paid previous loans without any problem. CIBIL score is your financial report. 

How does TransUnion CIBIL work?

As I mentioned above, TransUnion CIBIL is one of the credit information companies (CICs). It is authorised by the Reserve Bank of India. It collects all your information like loan details, credit card usage, repayment history, and outstanding dues from banks and other financial institutions. Then this company creates CIBIL reports. 

Function of TransUnion CIBIL:

• It maintains credit reports of individuals and companies. 
• It generates CIBIL scores and reports.
• It helps banks, NBFCs, and other lenders assess a person's creditworthiness.

Nowadays, banks, NBFCs, housing finance companies, microfinance institutions, and insurance companies use TransUnion CIBIL's credit reports. They use it for evaluating your loan application. 

Credit Score vs. CIBIL Score: Key Differences at a Glance 

CIBIL is the most widely used credit bureau in India. So many people use the terms Credit Score and CIBIL Score interchangeably.

How can I improve my Credit / CIBIL Score?

You need to maintain a good credit score if you want another loan in the future. It can also increase the chances of getting a loan with lower interest. Here is how you can improve your credit score.

• You should always pay your loan EMIs and credit card bills before the due date.
• If you have not owned a credit card or never took a loan, you may not have credit history. So start using a credit card.
• Use that credit card and repay bills responsibly.
• A longer and more positive credit history can improve your credit score.
• Then try to use less than 30% of your total credit card limit.
• You should avoid applying for too many credit cards or loans because it can lower your credit score.

Apart from this, you should repay your existing loan on time. If you clear outstanding dues on time, it can improve your credit score. When you want to improve your credit score, you should be patient because it takes time. 

Conclusion 

Credit score and CIBIL score both are used by lenders to evaluate the creditworthiness of the borrower. It is a report that shows how responsibly you have managed your loans and credit cards previously. If we talk separately about both scores, the credit score is issued by the licensed credit bureau. And the CIBIL score is issued by TransUnion CIBIL.

No matter what lenders are checking, CIBIL score or credit score, they get an idea about your loan repayment history. That's why it is important to maintain a good repayment journey, pay EMIs and credit card bills on time, and use credit cards responsibly. It improves your chances of getting a loan faster and with a lower interest rate. and

If you want to create a strong credit history, it is important to monitor your credit score regularly and avoid getting unnecessary loans and credit cards. Plus, keep your credit card use under control. If you want more such informative content about finance, stay connected with Loansjagat. 

Frequently asked questions 

Is 672 a good CIBIL score?

A good score actually depends on the bank or lender that is evaluating your credit report. Some lenders consider a 750+ score as good, and some lenders consider a score of 650+ good. If you have that much score, you are able to get the next loan easily.

Is a credit score of 750 good?

Yes, this score is generally good. If you have a score of 750 or more on your credit report, you can get a future loan easily.

What does a 700 CIBIL score mean?

700 CIBIL score is fair. It shows that the borrower has paid previous loans responsibly but made a few mistakes. Some lenders can consider you for a loan if you have this CIBIL score. 

How do I check my credit score or CIBIL score?

You can check your CIBIL score with PAN. Click on the CIBIL website, then click on “GET YOUR FREE CIBIL SCORE & REPORT”. Then add your email ID, mobile number, password, name, ID type, date of birth, and PIN.  This way you can get your CIBIL score.

What is a soft vs hard credit check?

A hard inquiry appears on your report only when you apply for a new loan. Soft inquiries appear on your report when the company reviews your credit report. Soft inquiries do not harm your credit score, but hard inquiries do. 

Can I increase my CIBIL score in 30 days?

It's difficult, but you can try by lowering your credit card balance and becoming an authorised user. You can try to increase your score, but it is not really possible to increase your CIBIL score in 30 days.

Which is more accurate to check credit score?

There is no single credit bureau that will show an accurate credit score. Every credit bureau is different. In India, TransUnion CIBIL, Experian, Equifax, and CRIF High Mark are the most famous credit bureaus. 

Can I improve my CIBIL score quickly?

Not quickly, but gradually. You can improve your CIBIL score gradually. Improvements can occur within a few months if repayment behaviour improves, although significant improvement depends on the individual's credit profile.

Are payments the biggest killer of credit scores?

When you make late EMI and bill payments, defaults, high credit utilisation, and multiple hard enquiries, these are some killers of your credit score. 

 Can I get a full credit report for free?

Yes, you can get a credit report for free online. There are many online platforms and apps that allow you to get credit reports. You can check it on payment apps like PhonePe and Paytm. Also, there are third-party apps like paisabazar which offers credit reports for free.