December 12, 2024 · 10 mins read
Santosh Kumar
People are often confused about what a CIBIL score and an Experian score are and whether they are the same. It is important to clear up this confusion for a smooth financial life. The first thing you need to know is that both Experian and CIBIL scores are essentially an individual's credit scores. Let us understand the definition, meaning, and significance of credit scores first before we proceed to clarify the difference and observe the similarities between Experian and CIBIL scores.
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1. Meaning: An individual's credit score is a number assigned to him based on his past financial behaviour and handling of the total credit available to him; in short, his credit history. This total credit involves things like loans, credit cards, EMIs, etc.
2. Importance and Significance: The credit score is extremely important because it is a major factor when banks and different lenders are deciding a person's eligibility for loans and credit cards. Financial institutions need to know whether or not an applicant is a responsible and trustworthy applicant because a lot of their money is at stake. If they provide credit to a person who is likely to default on his payments, the lenders will face a loss they want to avoid. Therefore, they look at each applicant's credit score to get an idea of how he has used credit in the past and how much risk is involved in giving him more money. The credit score has another significance. It matters once a person receives credit, as a higher credit score can get the borrower a higher amount of credit, longer tenure, and even lower than usual rates of interest.
3. Factors Affecting Credit Score: Factors that impact your credit score include your repayment history, credit utilisation ratio, credit mix, length of credit history, and number of credit enquiries.
4. Credit Score Range: Credit scores always range between 300 and 900. A lower score shows poor financial behaviour, whereas a higher score shows responsible credit management and improves an applicant's creditworthiness. A person with no credit history will have no in their credit score.
Read More:: What is the Use of CIBIL Score?
Even though you know about all the factors that affect a person's credit score, you cannot calculate your credit score yourself. In India, the credit score of all people is calculated by four Credit Information Companies (CICs) or credit bureaus. These are TransUnion CIBIL, Experian, Equifax and CRIF Highmark. While the credit score calculated by all these credit bureaus is relevant, minor differences might exist. Let us explore the differences as well as similarities between the two credit bureaus - Experian and CIBIL.
CIBIL score is a commonly used term for what is essentially your credit score. We have already explained the meaning and significance of a credit score. It is known as CIBIL score because CIBIL is one of India's oldest and most reputable credit information companies. It is a trustworthy name that calculates the CIBIL score of Indian people.
The full form of CIBIL is Credit Information Bureau (India) Limited. It partnered with TransUnion in 2000. TransUnion is an American multinational group based in the US. CIBIL is therefore also known as TransUnion CIBIL Ltd. CIBIL was founded in and has its headquarters in Mumbai, Maharashtra.
Of all India's four credit bureaus, CIBIL is the oldest. Each and every consumer's borrowing history is recorded with CIBIL, and based on that, CIBIL calculates the credit score, known as the CIBIL score of everyone.
Banks always check the CIBIL score of an applicant before they approve or reject his application for a loan or a credit card.
Read More:: Is 720 a Good CIBIL Score?
While CIBIL is an India credit information company partnered with US-based TransUnion, Experian is a global company. It is a leading global information services company that helps businesses target marketing offers, prevent fraud, manage credit risk, and automate decision-making. Experian is also one of India's credit information companies entrusted with the responsibility of generating credit reports of all individuals and assigning them appropriate credit scores.
The global company Experian established itself in India in 2006 under the name of two companies - Experian Credit Information Company of India Private Ltd and Experian Services India Private Ltd. the latter caters primarily to businesses by providing them with a range of data so that they can evaluate risk and increase their profits, Experian Credit Information Company of India Private Ltd is the one that is responsible for handling the credit information and history of the Indian citizens.
Experian Credit Information Company of India Private Ltd was founded as a joint venture with seven Indian banks: Federal Bank, Punjab National Bank, Axis Bank, Magna Finance, Indian Bank, Sundaram Finance, and Union Bank of India.
Having garnered a reputation and trust worldwide, Experian is seen as a credible credit bureau in India. Lenders highly trust the credit scores generated by Experian. In India, the Experian headquarters are situated in Kurla West, Mumbai.
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Both Experian and CIBIL are companies that calculate and assign credit scores to Indian individuals. However, the same person may get different credit scores from both these credit bureaus. This does not mean that one is more relevant or correct than the other. The difference is usually minor and insignificant and arises because of the following reasons.
While both CIBIL and Experian focus on similar aspects of a person's credit history to calculate his credit score, the sources they use to collect their data are slightly different. This is why minor differences in their scores can arise.
CIBIL mostly relies on its member institutions—banks and other financial institutions—to collect credit usage data. Experian, on the other hand, goes further to collect such data and even uses rental payment history, utility bill payments, and other public records to assess an individual's financial behaviour.
Since the number and type of data sources vary for both agencies, the final credit score also differs.
Not only do Experian and CIBIL's sources of data collection vary, but they also assign different importance and weightage to each contributing factor in an individual's credit score. Naturally, this causes some fluctuations in the calculation of credit scores by both agencies.
For instance, a person's loan repayment history is an essential factor that both CIBIL and Experian consider while calculating his final credit score. However, both these credit information companies might give different weightage to this parameter. One might see it as more significant than the other.
This means that there will be a little variation in the final calculated score.
Finally, both CIBIL and Experian use slightly different algorithms to calculate the credit score based on the various parameters. This difference in the algorithm is also a big reason why CIBIL and Experian scores could be different for the same individual. Along with the algorithm, the overall scoring models of the two credit bureaus are also different.
While it is true that because of the aforementioned factors, the credit score calculated by Experian and CIBIL can be slightly different, it cannot be said that one is better or worse than the other. Both TransUnion CIBIL and Experian Edit Information Company of India Private Ltd are well-known and highly trustworthy credit information companies in the country. Banks and other lenders trust the scores generated by both of these while assessing applications for loans, credit cards, etc.
Read More:: CIBIL Score Role in Loan Application Process
A person's credit score is a very important number in the context of their financial life since it decides whether or not they will be able to get good loans and credit cards. The credit score is calculated based on different aspects of an individual's credit history. In India, four credit information companies have been given the responsibility of calculating the credit scores of all individuals. These are TransUnion CIBIL, Experian, Equifax and CRIF Highmark.
Many people are often confused if Experian and CIBIL scores are the same or not. The answer is that both these credit bureaus can generate slightly different scores. Still, the difference will be minor and insignificant, and the scores generated by both are reliable and trustworthy. Lenders tend to find them equally credible. The difference in the score is not because of a difference in the factors that are used to calculate the credit score. The factors remain the same; however, there are slight differences in the sources that both CIBIL and Experian use to collect the credit-related data of people. The weightage assigned to various parameters and the algorithms and scoring models used by them are also different, causing a difference in the final credit score.
However, both Experian and CIBIL scores are highly trustworthy, and one cannot be said to be better or worse than the other.
1. How can I check my credit score on the CIBIL website?
Yes, you can check your credit score very easily online on the CIBIL website or even download their mobile app for the same. The process is simple, quick and straightforward. However, you must remember that you can check the score for free only once every year. You can opt for their paid subscription plans if you want to check them more often.
2. Is Experian credit score applicable in India?
Yes. Even though Experian is a global company, it was also established in India in 2006. Ever since then, the credit scores calculated by Experian Information Company of India Private Ltd are considered legit and applicable by all Indian lenders when assessing the eligibility of different applicants for loans and credit cards.
3. Is a CIBIL score needed for a personal loan?
Yes. Most banks and financial institutions require a CIBIL score in order to approve personal loan applications. A CIBIL score that is more than 700 is usually preferred by most lenders. They require the CIBIL score to see if you are a trustworthy applicant with a history of responsibly handling credit. Basically, your credit score helps them assess how much risk of loss is involved in granting a loan to you.
4. Why are my Experian and CIBIL scores different?
Experian and CIBIL scores can be slightly different for the same individual because of differences in the algorithms and scoring models of both credit bureaus. The difference can also arise because of variations in the weightage they assign to the same factors or because of differences in the sources they use to collect credit-related data from all individuals.
5. Can I improve my CIBIL score in one day?
No. You cannot improve your CIBIL score in one day. You can change it over a period of time, though. To change and improve your CIBIL score, you need to do things like start paying your loans, EMIs and credit card bills on time, maintain a low credit utilisation ratio, have a balanced and healthy credit mix, make as few loan and credit card enquiries as possible, pay off any pending dues, etc. IN case your low score is because of some error or discrepancy on the part of the credit bureau, you can file a complaint with them or raise a dispute to rectify the error and change your CIBIL score.
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