October 1, 2024 · 11 mins read
Santosh Kumar
When it comes to personal finance, the two main phrases that are used widely and make up the most prominent part of the entire discussion are Credit Score and CIBIL Score. In India, they are often used interchangeably in some instances, but certain questions need answers, like - is credit score and cibil score same? If yes, how? And if no, what are the differences that set them apart? So, let us look at what they mean, their similarities, and their differences.
A Credit Score is a measuring tool for assessing the creditworthiness of an individual with a financial record. It is a marker that influences several aspects of that individual's finances, such as approval of loan, loan amount, interest rates, employability etc. Credit Scores in India can be obtained from four major bureaus: CRIF High Mark, Experian, Equifax and CIBIL. The credit rating score typically ranges from 300 to 900, with a three-hundred on the lower end and 900 on the higher end. This score is directly proportional to a person's credit risk and automatically translates to their equivalent financial standing. For example, a person with scores in the 300 to 600 range would typically be considered financially high-risk and will have a hard time being taken seriously as a borrower. Similarly, a person with a 600 and above credit score would be considered financially a low or no-risk person and will be considered the same kind of treatment by lenders and banks.
When you generate your Credit Score, it comes with a few details that are relevant to your financials. Let us take a quick look at the details available on a credit score.
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Details of an individual, such as name, address, contact information, date of birth, and all other relevant information as mandated by the relevant country.
The details regarding how many credit accounts you possess, the status of each account, current, past, closed, or charged-off accounts, the maximum borrowing limit as shown by the score, the balance that is available on each account, payment history, including on-time and late payments, etc.
Credit inquiries are categorised into two parts—hard inquiries that reflect a record of your applications for credit cards and soft inquiries that you have made to inquire about pre-approved credit limits, etc. Hard inquiries affect and influence your credit score, while soft inquiries do not affect it.
This is the date you used all available credit, which is calculated by dividing the total credit card balances by the total credit card limits approved for you.
Public Financial Records: This includes any taxes, bankruptcies, etc. that you may have filed and their results. It also reflects whether you have any unpaid debts and their legal status at the moment.
This includes the average period you have held an account, which affects your credit history and credit score.
This holds information about the different types of credit accounts you have or have had. This can include revolving loans, credit card expenses, etc.–it shows how well you handle and manage your credit financials.
As the name suggests, this is the actual score, i.e., your credit score. It ranges from a specific number—300 to 850—where 300 is considered to be very low and gradually progresses up to 850. This section also contains the factors that have influenced your score, like payment history, utilisation of credit, etc.
This section will include tips on how to improve and/or maintain your credit score based on your personal report.
The final section helps consumers report discrepancies or inaccuracies that may be found in their credit scores. This is a preparatory measure and is meant to help users navigate the system in case of a mistake.
Read More:: How to File a Complaint for Your CIBIL Score- Step-by-Step Guide
A CIBIL Score is a specific type of Credit Score that is given out by one of India’s four prominent credit agencies- Credit Information Bureau (India) Limited. So, a CIBIL score is a type of Credit Score that is organic to India and caters exclusively to the Indian financial system. A CIBIL Score is India's most trusted Credit Score because India's first credit information firm generates it. It has years of history and is trusted by thousands of consumers, bankers, lenders and financial analysts.
Like a credit score in general, a CIBIL score also comes with many details. So let us see what the details available on the CIBIL Score are-
The CIBIL Score normally comes with a detailed report divided into 6 segments, which are:
The score calculated by CIBIL reflects your credit behaviour, as shown in the Accounts and Enquiries section of the CIBIL score.
As the name suggests, this segment comprises your details, beginning with your name and details like date of birth, PAN details, and all relevant documents that you might possess as a citizen of India.
This segment would include your address, contact numbers, email ID, etc.
This segment reflects your employment details, particularly those related to your monthly or yearly income, as documented in your bank details or through any other financial institution.
This is a major section that has all the relevant details of your bank cards, particularly your credit card details. This includes the number and types of cards that you have under your name, loan details like automobile, home or personal loan, bank account details, details of payments of loans, EMIs and instalments, and loan amount, both of the past and the current (if any), current balance, and a very detailed record of your monthly payments dating back to up-to a minimum of three years.
This segment details the time banks or other financial institutions have made inquiries and accessed your credit card or financial details for verification purposes.
Read More:: How to Improve CIBIL Score after Default
So, is credit score and cibil score same? Both of them serve a similar purpose, but there are certain areas and aspects in which they differ. Read along to understand these differences through a comprehensive table
Credit Score: A general financial score that is used universally.
CIBIL Score: A specific kind of credit score is generated exclusively by a particular bureau in India for financial evaluation.
Credit Score: Various models are available, like Vantage Score, FICO, etc, with different algorithms.
CIBIL Score: It is specifically calculated and analysed through CIBIL's own algorithm, tailor-made for Indian consumers.
Credit Score: This can be used Internationally with slight variations as per each country’s financial norms.
CIBIL Score: This is meant primarily for Indians, with a special focus on the Indian financial system.
Credit Score: The credit score generally has more details pertaining to personal data and a section on managing and addressing any discrepancies in your credit score.
CIBIL Score: A CIBIL score does not come with a recommendation for managing an irregular report.
Credit Score: They can be generated via various credit bureaus, such as Equifax, TransUnion, Experian, etc., in multiple countries as per their mandates.
CIBIL Score: It is specifically calculated by CIBIL, which is regulated by the Reserve Bank of India and is a licensed credit bureau that operates only in India.
Credit Score: The general range is 300-850 and may reach 900 depending on the calculating credit bureau.
CIBIL Score: The range goes from 300-900.
Credit Score: Depending on the generating bureau, the credit score will work universally.
CIBIL Score: The CIBIL score is specific to India and will work only in the Indian financial world.
Credit Score and CIBIL score both play a pivotal role in routing your financial journey; they both are markers of your financials and pave the way for what kind of trajectory your finances will take on. A higher credit score would mean better interest rates, better chances of availing a loan and a stamp of approval showing that you are a low-risk borrower, and lenders will tend to find you reliable. It will help you navigate your financial journey easily and confidently and make significant financial decisions. Meanwhile, having a low credit score would mean that you will have trouble establishing your portfolio as a borrower who can be trusted. You will have to endure higher interest rates and will not have access to other perks and privileges that come with a higher credit score.
Both Credit Scores and CIBIL scores are mark sheets that show your financial performance. They are numerical data of an individual's financial status, particularly their creditworthiness.
Read More:: How Much Cibil Score is Good? Find Out Now!
1. Timely payments: One of the key areas of calculating a credit score is analysing payment history, so it is advisable to always make your payments on the promised time. Whether you are paying debt, managing instalments, or EMIs, it is always better to stick to a schedule.
2. Credit utilisation: Always keep your credit utilisation low by maintaining a low balance and balanced credit utilisation ratio. Financial experts suggest that you aim to use only 30% of your credit limit to show more responsible spending behaviour, which in turn reflects on your creditworthiness and your credit score.
3. Diversifying your credit: This means that you should diversify your credit patterns by securing a mix of loans and credits. This will reflect on your overall score. However, you should always avoid claiming unnecessary loans and debts, which again demonstrate very irresponsible financial behaviour and would negatively impact your credit score.
4. Limiting hard inquiries: Since one aspect of your score evaluates inquiries, it is recommended that you always limit your loan application and hard inquiries to a minimum. Do not indulge in unnecessary inquiries to maintain a high credit score.
These tips and tricks should be considered if you are looking to build, improve, or rebuild your credit score. Navigating your financial journey can be tricky and confusing, but with these tips in mind, you can certainly place yourself on the higher side of the scorecard and build a stronger financial portfolio as a borrower.
Read More:: Increase Your CIBIL Score from 600 to 750
Credit and CIBIL Score are key tools in navigating your financial system. Their basic function remains the same- both help lenders, banks, and financial analysts evaluate and assess the creditworthiness of an individual. They both provide an insight into a person's financial status, particularly in terms of credit and credit risk; the basic difference is that Credit Score is the broader universal tool, whereas CIBIL is country-specific and caters exclusively to Indian consumers. While the fundamentals of both a credit score and a CIBIL score are the same, they cannot be used interchangeably in all contexts, and the usage will depend on the situation and in this case, the specific country. A credit score is the umbrella term, while a CIBIL score is a type of credit score that serves the same purpose.
Read More:: Is a 750 Credit Score Good?
Does a CIBIL Score work as a credit score?
Yes, a CIBIL score is a type of credit score and works as a credit score.
What is the highest score that can be achieved on a credit score?
The highest credit score can be achieved at 850-900, depending on the calculating or issuing bureau.
Are CIBIL scores and Credit Scores the same thing?
Essentially, a CIBIL score is one type of credit score that is exclusive to the Indian financial system and Indian consumers as an Indian credit bureau generates it.
What is considered a good CIBIL score in India?
Generally, a score of 750 and higher is considered to be a strong score in India and enhances your creditworthiness.
What does having a low credit score mean?
Having a low credit score puts you at greater risk as a borrower. It also lessens your creditworthiness and limits your credit approval.
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