September 13, 2024 · 11 mins read
Santosh Kumar
What is difference between CIBIL and Experian credit score? What exactly is a credit score? Why do we need it? How are CIBIL and Experian credit scores different? Learn about the same and find out which credit bureau is better for you.
Whenever you need a loan, banks and credit card companies ask you for your credit history. Ever wondered why?
By calculating your credit score, banks and credit card companies assure the probability of you being able to repay your approved loan. Ranging from 300 to 900, a credit score is a numerical expression calculated based on your credit history. There are four major credit bureaus in India, namely CIBIL, Experian, Equifax, and CRIF High Mark, with different algorithms for calculating credit scores.
A credit score is a three-digit number that indicates the capacity to repay loans. It is an essential parameter and is calculated by assessing your credit history. A credit score helps lenders to check your creditworthiness and analyze risk from your end as a borrower. A high credit score improves loan approvals to a good extent by signifying your responsible credit behaviour. It also adds numerous other benefits like financial flexibility, lower interest rates, higher credit limits, access to special offers and many more.
In India, the Credit Information Bureau India Limited or CIBIL, is the most common bureau that has access to the credit records of nearly 600 million people. Therefore, 'CIBIL score' is often used synonymously with 'credit score'.
Read More: Top Factors that Affect Your CIBIL Score
The three-digit numerical expression is calculated by considering many essential factors by credit information companies like CIBIL or Experian, which are as follows:
1. Payment history: This is the most critical factor, and it shows how responsible and consistent you are in paying off your bills on time. Payment on time is vital to get a good credit score.
2. Credit usage: The percentage of available credit limit that you are using also impacts your credit score. The more you use your credit card, the more you balance it relative to your credit limit, which isn't good for your credit score.
3. Length of credit history: Old and well-maintained accounts are suitable for achieving a high credit score reflecting your responsiveness.
4. Types of credit: Unsecured loans aren't really healthy for your credit score if not repaid on time, while the secured ones can have a good impact if repaid on time.
5. Credit mix: It plays a significant role in the calculation of your credit score and also reflects your management skills and financial responsibilities.
6. Number of credit inquiries: The number of hard inquiries in a short time can lower your credit score.
Read More: Is 720 a Good CIBIL Score?
Whenever you need a large sum of money, whether it's an emergency or even in everyday life, the only thought that crosses our mind is to get a loan. When in need of a loan from lenders like banks or credit card companies, you need to prove your ability to repay the amount to assure them they have minimum risk by lending you, their money.
That's where your credit score comes into the scene; it's the value of your creditworthiness. And if you have a high credit score, you can get loans and credit card approval easily along with several other benefits.
Read More: What is the Use of CIBIL Score?
Maintaining a good credit score is something that everyone aims for, but why exactly is it so important? Here are some of the benefits you can enjoy with a good credit score:
1. Financial flexibility: A high credit score is like a key to any door during an emergency. Signifying you as a trusted borrower, you can get credit from banks and credit card companies anytime, that too with low interest rates.
2. Access to credit: Not only during emergencies but also in everyday life, a good credit score allows you to get credit cards and loans anytime and anywhere.
3. Lower interest rates: People with a good credit score are offered lower interest rates on their approved loans and insurance.
4. Higher credit limits: Since your high credit score signifies your responsive behaviour towards finances, you will be offered high credit limits on your credit cards and loans.
5. Lesser Security deposit: Whether it's car insurance or apartment rent, you are always asked to pay a certain amount of security fees. Having a good credit score can help you reduce your security deposits.
6. More negotiating power: A high credit score empowers you to negotiate for better terms when dealing with lenders.
7. Access to special offers: A good score can give access to premium credit cards, extra reward points, cashback, and exclusive services.
Read More: How Credit Card Usage Makes or Breaks Your Credit Score?
Your credit score implies your creditworthiness and ranges from 300 to 900,. Here are the various ranges of score and their meanings:
1. Excellent: 750-900
2. Good: 650-750
3. Fair/Average: 550-650
4. Poor: Below 550
Credit Information Bureau India Limited, also known as TransUnion CIBIL, is an RBI-licensed Indian credit information company. It has been one of India's key credit bureaus since 2000 and is used by almost 90% of Indians.
Read More: How Students with No Income Can Get a Credit Card
Experian is a global credit report agency. It operates in about 40 countries, including India. Recognized by the Security and Exchange Board of India (SEBI), it was licensed to open in India in 2010, and since then, it stands among the well-known credit information companies (CICS) in India
Both CIBIL and Experian are popular and trusted credit information companies in India, and they have been providing their services for years. There are several differences between both. Here are some of them:
1. Data collection: Experian collects data from an extensive range of sources, including lenders, credit card companies, banks, rental payment history, utility bills, public records and many more, to calculate credit scores. In contrast, CIBIL collects data from banks and financial institutions.
2. Scoring models: The CIBIL scoring model is more specific to the Indian financial environment, whereas Experian involves the Fair Isaac Corporation (FICO) scoring model, which is mainly used in the United States. Both the companies have different algorithms, which is why Experian and CIBIL scores are different.
3. Factors given more weight to: While calculating the credit score, the primary factors, including payment history, credit usage, length of credit history, types of credits, and new credit inquiries, are common and given almost equal importance by both Experian and CIBIL. However, an Experian credit score provides more value to one with regular and timely payments. In contrast, a CIBIL credit score can be higher if your Credit Utilisation Ratio (CUR) is low while estimating your credit score.
4. The credit score range: A significant difference is the range of credit scores of both companies. CIBIL ranges from 300 to 900, whereas Experian's credit score ranges from 300 to 850.
5. Other factors in CIBIL vs. Experian Score: Experian is a globally operated credit card company, whereas CIBIL operates only in India. Experian is the most popular credit information company after CIBIL in India. Experian was recognized by the Security and Exchange Board of India (SEBI) in 2010, while CIBIL has been recognized by the Reserve Bank of India (RBI) since the year 2000. The subscription fee for Experian is INR 350, and for CIBIL, it is INR 550. An offline Experian credit report takes up to 20 days to deliver to the individual or company, whereas a CIBIL credit report is delivered in 7 days.
Read More: CIBIL Score Role in Loan Application Process
Both CIBIL and Experian credit scores are accurate in their own way. Although their credit scoring models may vary, their credit scores are widely accepted and trusted. Considering your financial goals and knowing the type of credit you want, along with understanding both scores, can help you make a choice between them.
If you ask precisely which credit score is better in India? Experian vs. CIBIL. Then the reply to this would be that although both CIBIL and Experian scores are popular in India and provide accurate credit scores, however, since CIBIL has been recognized by the RBI and established as India's first credit bureau for over two decades, it is more popular than Experian. Because of its popularity, CIBIL is used as a standard by over 90% of Indian credit companies, but it doesn't necessarily prove CIBIL to be the best. Both CIBIL and Experian scores are equally valid and accepted.
Yes, banks and financial institutions check both Experian and CIBIL credit scores while deciding and approving your loans. In India, CIBIL scores are considered superior to Experian because of its popularity.
Now that you know what exactly a credit score is, how it is calculated, and the factors why Experian and CIBIL score are different, Let’s discuss some ways to improve your credit score.
1. Minimize your debts as much as possible. Make sure to pay your bills on time to avoid debt.
2. Keep your Credit Utilization Ratio (CUR) below 30% and consistently pay off balances. Higher Credit Utilization Ratio can negatively affect your credit score.
3. Having a long credit history helps to get a high credit score. Therefore, avoid closing or cancelling your old and well-maintained credit accounts.
4. Try to manage all your credit cards and loans well.
5. Try to maintain a balance on your loan and your credit cards. Check your credit score daily and look for any errors or discrepancies.
6. Use secure credit cards. Making timely payments on a secured card can positively impact your credit score.
Read More: How To Read Your Credit Report
Along with understanding what is difference between CIBIL and Experian credit score, we learnt a lot about credit scores, mainly their uses and ways to get a higher number. Both CIBIL and Experian are India's most popular credit bureaus, providing credit scores and reports for years.
Though different in origin and presence, both these companies are trusted and widely acceptable in India. Their credit scores are accurate in their own ways. It's solely your choice to follow any of them by considering your needs and circumstances. Maintaining a good credit score is a must and needs to be practised, be it CIBIL or Experian.
What is a credit score?
A credit score is a three-digit number that indicates your capacity to repay loans. It helps the lenders to check your creditworthiness.
What is CIBIL?
Credit information bureau India Limited (CIBIL) is an Indian credit company that collects and maintains credit information of individuals and companies.
What is Experian?
Experian is a global credit reporting agency that provides credit scores and reports in about 40 countries, including India.
Is CIBIL better than Experian credit scores?
Both CIBIL and Experian credit scores are valid and accurate in their own ways. However, if asked about CIBIL vs. Experian, one can say that CIBIL is more popular than Experian in India. Over 90% of the Indian credit companies use CIBIL as a standard.
Is the CIBIL score safe?
Yes, the CIBIL score is safe and secure, and it is India's most popular credit information company.
Is the Experian credit score accurate?
Yes, Experian provides an accurate credit score. It is a global company that is highly acceptable and trusted.
How is Experian different from CIBIL?
Experian and CIBIL are both credit information companies of different origins. They both have different scoring models and various data collection sources.
What is a good Experian and CIBIL credit score?
Ranging from 300 to 900, a credit score of 750 or above is considered good.
How to improve your credit score?
One can significantly improve their credit score by paying off all debts and credit card bills in a timely manner and avoiding loans that you won't be able to repay.
What are the benefits of having a good credit score?
Having an excellent Experian credit score or CIBIL score not only helps to get credit cards and loan approvals faster but also provides you with additional benefits, like lower interest rates on your loan, higher credit limit on your cards, special offers and many more.
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