Cibil Score vs Credit Score:  What’s the Distinction?

If you also want to strengthen your knowledge towards finance industry and financial literacy, then this article can prove to be very helpful for you. In this article, we will talk about the difference between Cibil Score and Credit Score and know what is the subtle difference between CIBIL Score and Credit Score that makes both of them different. Now you must be well aware of the importance of CIBIL score in our financial world.

Now when we hear CIBIL Score and Credit Score together, we get confused as to what is the difference between these two and which of the CIBIL score and credit score is checked before taking any loan or credit card? This article of ours will turn your confusion into clarity and before the end of this article you will know what is the major difference between Cibil Score and Credit Score? Now it is possible that your credit score may be quite good but your CIBIL score may be average or low, then it is important to keep this in mind and it is important to check both.

Now, before knowing the difference between these two, it is more important to know what CIBIL score and credit score are –

What is a Credit Score?

A credit score serves as a numerical depiction of a person’s creditworthiness and their credit track record. It plays an important role for lenders, including banks and credit card companies, in evaluating the potential risks when considering lending to a particular individual or institution. Generally, this score is calculated by credit bureaus or credit reporting agencies from information in an individual’s credit report, including details about their borrowing and repayment history.

Credit scores usually fall within a specific range, with higher scores indicating lower credit risk and an increased likelihood of meeting loan obligations as agreed. In the United States, the most widely adopted credit scoring model is the FICO (Fair Isaac Corporation) score, which ranges from 300 to 850, with higher scores being more favourable. Different countries may employ diverse credit scoring models for similar purposes.

Credit Bureau Agencies in India:

In India, there are four credit information companies that have received licences from the Reserve Bank of India. The Credit Information Bureau (India) Limited (CIBIL) has been operating as a Credit Information Company since January 2001. Subsequently, in 2010, Experian, Equifax , and CRIF High Mark were granted licences by the Reserve Bank of India to function as Credit Information Companies in India. TransUnion later acquired CIBIL.

Among the four credit information companies, the most widely recognized is the CIBIL credit score. The CIBIL credit score is a three-digit number that provides a concise summary of an individual’s credit history and creditworthiness. This score falls within a range of 300 to 900, with 900 being the highest achievable score. Individuals with no established credit history receive a score of -1, while those with credit histories of less than six months are assigned a score of 0. Building a satisfactory CIBIL credit score requires time, typically ranging from 18 to 36 months or even longer of consistent credit usage.

These same bureau agencies provide them credit score or credit report to the government and lenders like banks, financial institutions etc. and even to any individual borrower who wants to see his credit score or credit report.

Difference between Credit Score and Credit Report?

Now if we talk about the difference between credit score and credit report, credit score is a three digit numeric number which ranges between 300 to 900. If your credit score is good then it will be between 750 to 900 and if your credit score is less than this then it is considered as average or poor score.

Whereas the credit report shows all the credit history of your account and details of loans. In this, how many loans have you taken, what types of loans have you taken, how many defaults have happened, when was your EMI payment, why did your credit score decrease etc. all this is covered in your credit report.

Suppose you have already taken a loan and its EMI is due and you default on the EMI or you make late payment of EMI, or you had taken many loans at one time due to which you defaulted, apart from this, there can be many other reasons like if you do not make your credit card payment on time, then due to all these reasons your credit score comes down. Now by collecting all your data from banks, these credit bureau agencies provide credit score to you and the banks and on the basis of that you are provided loan or credit card.

Difference between Cibil Score and Credit Score:

Now the credit score provided by these four credit bureau agencies is generally called credit score but if your credit score is extracted from TransUnion Cibil  which is the name of a credit bureau agency or you check your credit score through it, then we call it Cibil score. So this is a very slight difference between Cibil Score and credit score.

These four credit bureau agencies approved by RBI provide credit score to you and banks and all financial institutions but now among these four agencies, TransUnion Cibil is considered to be the most popular agency because its method of providing credit score by analyzing all the data is more trustworthy. That is why many lenders, banks and financial institutions give more importance to the CIBIL score. Therefore, when your credit score is checked by this TransUnion Cibil agency, then in other words we call it CIBIL score.

And you should accept that your CIBIL score and credit score may be different because the method of TransUnion Cibil agency to judge your past payments and loans is a little different from other agencies. Therefore, when you check your CIBIL score, it is important that you also check your credit score once, because it is possible that your credit score is quite good but your CIBIL score is showing average. In such a situation, you should analyze your CIBIL report or credit report thoroughly to see where and which payment you have defaulted.

FAQs: