Banks today prefer borrowers with strong credit profiles, making it important to keep track of your credit score. Regularly checking your score helps you understand your financial standing and improves your chances of getting loans and credit cards on better terms.
However, many people often confuse a credit score with a CIBIL score. While these terms are used interchangeably, they are not the same. There is a clear difference between them in terms of usage, impact, and how lenders assess your creditworthiness.
What is CIBIL Score?
As far as the CIBIL score is concerned, it is basically a type of credit score issued by TransUnion CIBIL, one of India's credit information companies. The score ranges from 300 to 900, and a higher score indicates better credit health. Since CIBIL is one of the oldest and most widely used credit bureaus in India, many people often assume that every credit score is CIBIL score, which is not correct.
What Is a Credit Score?
A credit score is a three-digit number that reflects a person's creditworthiness based on their borrowing and repayment history. It is calculated using factors such as payment history, outstanding debt, credit utilization, loan mix, and credit inquiries. Lenders use this score to evaluate the risk of lending money to an individual.
What's difference between credit score and CIBIL score?
Although both terms are often used interchangeably, they have a clear difference. India has multiple credit bureaus, including TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. Each bureau generates its own credit score using its own methodology and data sources. As a result, a person's score may vary slightly across bureaus. Therefore, while every CIBIL score is a credit score, not every credit score is a CIBIL score.
Which score lenders prefer?
Different lenders may rely on different credit bureaus when evaluating loan applications. Some banks primarily use CIBIL scores, while others may refer to reports from Experian, Equifax, or CRIF High Mark. In many cases, lenders review the entire credit report and not just the score before making a lending decision.
How to maintain good credit score?
Regardless of the bureau, the factors that influence credit scores remain largely the same. Paying EMIs and credit card bills on time, keeping credit utilization low, avoiding excessive loan applications, and regularly checking credit reports can help maintain a strong credit profile. A healthy score generally improves the chances of obtaining loans at better interest rates and terms.