Credit Score vs. CIBIL Score: Which one matters more for loans?
Credit and CIBIL scores are vital for borrowing. Credit scores reflect your history, while CIBIL scores, ranging from 300 to 900, influence lending decisions. Keeping a score above 700 ensures better loan opportunities, underscoring the importance of timely payments and financial diligence.
Assessing your financial health is extremely important for your future borrowings. If you are planning to consider a personal loan or a credit card, then you must have come across the terms ‘credit score’ and ‘CIBIL score’. Before you apply for any credit, it is extremely important that you understand the difference between these terms. Let us discuss in detail:
What is a credit score?
A credit score is a reflection of your credit history and defines your creditworthiness. Your credit score is calculated based on various factors including your past credits, repayment pattern, credit repayments and defaults as well as inquiries made if any.
There are four major credit bureaus which are approved by the Reserve Bank of India and provide credit scores. These are; TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. Every bureau uses its own methods and the scores may differ slightly because of this.
What is a CIBIL score?
A CIBIL score is a three digit number which is maintained and provided by the TransUnion CIBIL, one of the four credit bureaus of India. This score ranges between 300 to 900. The higher the score, the better is your creditworthiness.
CIBIL score is the most popular and widely used score in India and is based on the Credit Information Report also known as CIR which is a summary of past credits which helps the lenders analyse your past defaults to determine whether you are eligible for credit or not.
Credit score vs. CIBIL score: key differences
| Basis | CIBIL score | Credit score |
| Provided by | Issued by the Credit Information Bureau (India) Limited (CIBIL). | A general term for scores provided by credit bureaus such as CIBIL, Experian, Equifax, and CRIF High Mark. |
| Range | Ranges from 300 to 900 | Typically ranges from 300 to 850, though it varies based on the credit bureau. |
| Recognition | Most popularly accepted by lenders in India. | All credit scores assess creditworthiness, but CIBIL scores are more preferred by lenders in India. |
| Calculation | CIBIL uses its own parameters to calculate the score. | The parameters and calculation varies for different bureaus. All follow a unique method. |
| Report | Based on CIR (credit information report). | Different bureaus follow their own report. The results may vary slightly but all including CIBIL reflect creditworthiness. |
Maintaining a healthy score
CIBIL score and credit score differ from each other. However, the scores reflect your creditworthiness and maintaining a healthy score is extremely important to secure best deals on future borrowings.
CIBIL score is the most common credit score in India and it is extremely important that you aim at maintaining a score above 700 in order to get low interest rates on personal loans as well as improve your chances of getting your loan application approved.
You must note that even a single payment default can cause damage to your score. Hence, you must always stay ahead of your bills and always pay on time.
In conclusion, you must avoid making regular hard inquiries if you are unsure of getting a credit as it can cause a negative impact on your creditworthiness. Before you think of getting any credit, you must first understand your need and whether or not you will be able to afford it or not.
With this you will not only be able to maintain your credit score but also will be able to avoid any unnecessary financial burdens. Credit scores can not be increased overnight, hence, by staying consistent and diligent with your repayments you can gradually increase your credit score.
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