The first thing any bank or financial institution will ask if you go for a loan or credit card is your credit score or CIBIL Score. For many of us, these two words mean the same, however, this isn’t the case my friends. CIBIL Score is a credit score itself, I know it might be confusing but let us understand the difference between the two together step by step.
A credit score is a 3-digit number that defines your worthiness for getting credit. It ranges from 300 to 900 where any score above 750 is considered a good score.
The numbers start adding the second you take a loan or credit card. They are calculated by taking into consideration your borrowing history, your account, total debt that you owe, your repayment history and the enquires you make like applying for a loan or credit card.
Your credit score helps you get a loan easily and immediately but also helps in deciding your interest rates.
Doesn’t a Credit score sound just like CIBIL score? Have patience, we’re getting to that slowly.
A credit bureau is an agency that provides you with your credit score and report. It complies with the information it needs to generate a score primarily from the government and lenders.
It is the credit bureau’s responsibility to collect and distribute information about your creditworthiness and generate a score.
Major Credit Bureaus
There are 4 major credit bureaus in India that provide you with a credit score and report. These are as follows:
- TransUnion CIBIL: It is the most used and popular credit bureau in India. It came into existence in 2000 and has been linked with many NBFCs and several banks, offering a comprehensive report to help people meet their financial needs and get loans.
- Equifax: It is one of the 4 major bureaus that started in 2006 and till 2010 it was fully functional with an operational license.
- Experian: This is a multinational credit reporting company established in 1996 however, started operating in 2010.
- CRIF High Mark: It is RBI approved credit provider in India, which was founded in 2005.
How is CIBIL Score different from the Credit Score?
Now that we have understood what credit score is and what the 4 major credit providing bureaus are, it will be very easy to understand the slight difference that exists between CIBIL Score and Credit Score which in fact makes a huge difference.
Do you know the full form of CIBIL?
Maybe you do or maybe you don’t. let me just tell it for a better understanding of everyone.
Credit Information Bureau (India) Limited is what CIBIL stands for.
Can you see Credit being a part of the full form of CIBIL, I can too! Seeing this you might be wondering that the CIBIL is also a Credit provider so, what’s the difference.
Yes, TransUnion CIBIL is no doubt a credit score and report provider however, it has created a brand of itself. Just like every product by Apple has a definite identity that connects it with the company (iPhone6, iPhone7 or Apple earphones, Apple chargers etc) Similarly, any service that CIBIL provides has a name that connects it to the company.
CIBIL Score is a credit score but just because CIBIL is so popular and amongst the top 4 Credit Bureaus, it is often considered a separate entity.
So, to put it straight CIBIL Score is also a Credit score but for a credit score to be considered a CIBIL score then it must be checked from TransUnion CIBIL.
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- How to increase your CIBIL Score?
Why do people often get confused between CIBIL Score and Credit Score?
Almost every bank and financial institution prefer checking Credit score from CIBIL which is the major reason why people get confused between CIBIL score and credit score.
Why do banks and financial institutions prefer CIBIL over anything else?
They prefer CIBIL over any other credit providing bureau because of its popularity, reliability, and trustworthiness.
Can the CIBIL Score differ from the Credit Score? If yes, then why?
Yes, it is very much possible that your CIBIL score might be different from your Credit Score. It is because CIBIL uses slightly different criteria to check, judge our credit history and generate scores than other Credit providing bureaus.