What is the Difference Between Credit Score and CIBIL Score

A huge part of financial management entails managing your credit score. If you are planning on applying for a loan or a credit card, it is important to understand what a credit score is and how it is calculated. You should also be aware of how a credit score varies from a CIBIL score and how you can improve it to increase your financial credibility.

Difference Between Credit Score and CIBIL Score

The difference between credit score and cibil is that a credit score is provided by all of the 4 credit bureaus in India. However, only the credit score calculated by CIBIL is known as the CIBIL score.

The credit score obtained from any of the 4 licensed credit bureaus is valid. Though most banks do prefer a CIBIL score. All you need to do to access your CIBIL score is visit the official website of the credit bureau at www.cibil.com. You can get your score for free.

So, what is the difference between credit score and CIBIL score?

Here is the difference between credit score and CIBIL score explained in a tabulated format –

What is a Credit score?

A credit score is an indicator of a person’s creditworthiness as a potential borrower. Your credit score is a 3-digit summary defining your credit history. The credit bureau calculates this 3-digit score using your past financial behaviour. A credit score in India ranges between 300 to 900, wherein 900 is the highest.

A credit score is also commonly known as a credit rating. It is calculated after considering your credit history, which includes your total debt, number of credit accounts, credit card bills, credit utilisation information, and your repayment history. In addition, the number of credit enquiries for loan or credit card applications is also taken into account while calculating your credit rating. The higher your credit score is, the more responsible you have been with credit in the past. Here is a detailed article written on what is a credit score, read the article to know more.

The Reserve Bank of India (RBI) has licensed four credit bureaus - CIBIL, Equifax, CRIF Highmark, and Experian. Every credit bureau uses their own algorithm to calculate credit scores. Lenders usually give preference to borrowers having a credit score that is 700 or above. Ideally, you should check your credit score before applying for a loan or credit card. You can place an online request to receive your credit score on the credit rating company’s website.

What is CIBIL?

CIBIL is Credit Information Bureau (India) Limited. It is a credit bureau among the four authorised credit bureaus licensed by the Reserve Bank of India. CIBIL collects data from financial institutions & lenders related to credit. It uses it to generate credit reports and scores.

The company was the first in India to offer credit scoring services. It helps lenders make the best loan decisions. Banks & NBFCs check your CIBIL score to understand your repayment behaviour if you apply for a personal loan.

CIBIL has created a strong reputation due to its wide network of data providers and reliable score tracking. The score is based on past repayment activity and credit behaviour maintained by registered financial partners.

What is a CIBIL Score?

A CIBIL score is a consumer’s credit score. It is a numerical summary of your credit history and repayment behaviour. CIBIL stands for Credit Information Bureau (India) Limited, and is one of the four major credit bureaus in India.

A CIBIL credit score takes time to build up. It may take about 18 to 36 months of credit usage to acquire a decent credit score. The CIBIL score is a 3-digit number, ranging between 300 to 900. The banks and non- banking finance companies (NBFCs) consider a score of 750 or above very good.

Importance of Credit Score and CIBIL Score

Responsible credit behaviour can help you get preferential rates on loans, along with speeding up the approval process. Since your credit behaviour is numerically depicted in the form of your credit/CIBIL score, your credibility is gauged by the score you have.

Your CIBIL score/credit score plays a critical role in the loan application process. It is an important factor considered by lenders while offering you a loan or credit card. A higher score makes it easier for you to get a loan or a credit card. It also ensures that you get the best deal in terms of benefits and interest rates.

Your credit score serves as an important indicator to lenders of your capacity to repay your loans. It is prepared using the data gathered from lenders and is integrated in the Credit Information Report or CIR. Financial institutions use this information to determine whether to lend you money, and if so, then how much and at what rate.

Having a higher credit score increases your chances of getting a loan or credit card.

Some of the benefits of a good credit score are:

1. Higher loan amount
2. Better interest rates
3. Quicker loan approvals
4. Longer repayment period

Now that you are aware of the importance of a good credit score, it will give you an edge to learn how to improve your credit rating or CIBIL score.

What does CIBIL Report Include?

Is CIBIL score and credit score same? The answer is no. You already learned the credit score and CIBIL score differences above. Now, you need to know what the CIBIL report includes. Your CIBIL report gives a detailed summary of your credit behaviour. Here's what it includes: 

1. Credit Score -It is a 3-digit number between 300 and 900 that summarises your credit history and shows how reliable you are in repaying.

2. Contact Information -Your CIBIL report includes your mobile number, email, and address submitted during previous loan or credit applications for identification.

3. Personal Details -It records your name, date of birth, PAN number, gender, and identification details submitted to financial institutions.

4. Account Details -It shows all your current and closed credit accounts, the type of loan, amount borrowed, balance, and repayment track record.

5. Inquiry Information -Any time you apply for a credit card or loan, it is listed as a ‘hard inquiry’ in your CIBIL report with details.

6. Employment Information -It includes your income details and employment type submitted at the time of taking loans or credit from registered lenders.

There are no other components beyond this. The report includes only the information needed to assess and verify your financial credibility.

How to increase Credit Score?

You can improve your credit score by practicing financial prudence. Some useful tips to boost and maintain a good credit score are mentioned here.

1. Pay your bills on time: It is prudent to settle your credit card bills every month well before the due date. You must also avoid revolving credit, as it may be viewed as risky credit behaviour. Failing to make payments on time is a sure way of hampering your credit score. Every time you default on your payment, it gets recorded in your credit report and eventually ends up hurting your score. Not only setting your dues on time will save you late fees, it will also reduce the extra interest costs along with improving your credit score.

2. Don’t overutilize your credit card: It is part of the responsible credit behaviour to keep well within your spending limits. Overspending on your credit cards consistently each month may be considered irresponsible by lenders. Try keeping your utilization ratio up to 30-40% in order to avoid any financial pressure later. You should always consider your capability to repay timely before indulging in overutilization. You should know the smart ways to use credit card for maximum benefits.

3. Maintain older credit cards: If you continue using older cards your credit history becomes stronger and lengthier. If you have a credit card account that you have been maintaining for a long time, it helps boost your score.

4. Keep a check on your score to spot errors and rectify them: If you have a good payment history yet your score seems to be dipping, it’s likely that there’s an error in calculation. You must address it and get it rectified timely.

5. Have different forms of credit: It is safer to maintain a healthy mix of secured and unsecured loans. A lot of unsecured loans can also have a negative impact on your credit score. Also, if you haven’t borrowed money before, you won’t have a credit history, which also affects your score.

6. Try keeping it to one loan at a time: The number of loans against you can also affect your credit/CIBIL score. It is recommended that you take one loan at a time, clear it off and then take another loan.

7. Negotiate your credit card limit: Since your credit utilization ratio can greatly impact your financial well-being, overutilization can lead to a dip in your score. You may negotiate with your bank to customize your credit limit based on your expenses.

8. Choose long-term loans: The interest rates and EMIs for long-term loans are lower. This makes repayment easier for you and minimizes your chances of defaulting. However, you will end up paying more interest in case of a long-term loan.

You may also read this: Personal loan myths

It is important that you keep a close check on your credit score. Not only will it help you ensure your access to a line of credit when needed, but you can spot if an error has been made in your credit score calculations, and can make timely amends. You should check your score online before applying for a financial product. In case you have a low score, you should work on improving it before applying for a line of credit.

Frequently Asked Questions (FAQs)

Q.1. Which Holds More Value — CIBIL Score or Credit Score?

Lenders trust both scores, but many prefer the CIBIL score due to its strong presence in India. The difference between credit score and CIBIL score lies in the source. While all scores are valid, CIBIL’s score is often checked first. A high score from any bureau helps, but banks may prioritise your CIBIL score when approving loans.

Q.2. Are CIBIL Score and Credit Score the Same Thing?

Is credit score and CIBIL score the same? No, they are not the same. The difference between CIBIL and credit score is that a credit score can be given by any bureau. A CIBIL score is issued only by CIBIL. While both show credit behaviour, CIBIL scores are more commonly used by lenders in India for quicker approval and risk check.

Q.3. How Can You Check Your CIBIL or Credit Score Online?

Visit official websites like CIBIL or other credit bureau portals to check your score online. Fill in your PAN number alongside your mobile number with basic personal details. You can view your score for free once every year. Checking regularly will help you understand where your score drops or errors are there in the report.

Q.4. What Is Considered a Good Credit Score?

A score from 750 - 900 is considered good. It shows a strong repayment history and low credit risk. Lenders feel confident when your credit score is high. This helps you get quicker loan approvals and better interest rates. Keeping your score above 750 improves your chances of being trusted with higher loan amounts.

Q.5. What Are the Ways to Check Both Your CIBIL and Credit Scores?

When it comes to credit score and CIBIL score, you can check both scores from credit bureau websites. Visit www.cibil.com for your CIBIL score and the websites of Experian, Equifax, or CRIF Highmark for others. You’ll need your PAN and mobile number. Some financial apps and banks also allow score checks. You should monitor them regularly to understand your credit health better.

Q.6. How Frequently Should You Monitor Your Credit Score?

Check your credit score once every three months. This helps track your repayment habits and shows any sudden drop. Regular monitoring helps you troubleshoot the errors. It helps manage your finances better. While applying for a personal loan, you must check your score before applying to make sure you qualify for the best deal.

Q.7. What Can Cause Your Credit Score to Drop?

Late payments, overusing credit cards, or having too many loan applications can drop your score. Your credit report may also have mistakes affecting your score. That’s why it’s important to know the difference between credit score and CIBIL score and monitor both regularly. A dip in score reduces your chances of getting good loan offers.

Q.8. Can a Higher CIBIL Score Improve Your Chances of Getting a Loan?

A high CIBIL score shows you repay on time and manage credit well. Banks and NBFCs are more willing to give loans to such people. The difference between credit score and CIBIL score matters because most Indian lenders rely on CIBIL. A score above 750 improves your chances of getting faster approval and lower rates.