Credit Score vs CIBIL Score: Are They The Same?

Applying for a loan or a credit card, you may have been asked about your CIBIL score or credit score. While these terms are often used interchangeably, THEY ARE NOT THE SAME. Yes, they aren’t and that is why you need to understand the difference between credit score and CIBIL score. Let us help you out in understanding the key differentiators and why people are confused between the two. 

Quick Summary

1. No, Credit score and CIBIL score are not the same.
2. Credit score is a 3 digit score indicating your creditworthiness, while CIBIL score is credit score generated by TransUnion CIBIL.
3. Credit score is used globally while CIBIL Score is generated in India.
4. Use RBI licensed credit bureaus including; TransUnion CIBIL, Experian India, Equifax India and CRIF High Mark to check your credit score.

What is a Credit Score?

The three digit number that you see upon entering your PAN details online on credit score calculator is the CREDIT SCORE. It is an indicator of how likely you are to repay borrowed money. It is based on your credit history. Your credit history shows your ability to repay loans, existing loan accounts in your name, your credit card usage and more.

Credit scores generally range between 300 and 900. A higher credit score indicates a better credit profile to lenders. When you have a credit score that exceeds 750 points, it shows good creditworthiness which helps you get quick loans and credit cards at lower interest rates and better terms.

What is a CIBIL Score?

Now that you know what a credit score is, we should discuss CIBIL score. CIBIL Score is generated by TransUnion CIBIL, one of India’s leading credit bureaus. It also has a 3-digit credit score but because of their brand the CIBIL score gained popularity and is used synonymously with credit score. So, to sum up, CIBIL score is credit score, but credit score is not just CIBIL scores. 

Credit Score vs CIBIL Score: Key Differences

Why the Confusion Between the Two?

The confusion arises because CIBIL score is the most popular credit score in India. When lenders mention CIBIL score, they often mean your credit score. CIBIL by TransUnion was the first credit bureau in India which was established in the year 2000. It was because of this that the term ‘CIBIL score’ has become synonymous with ‘credit score’ in everyday conversations.

How Are Credit Scores (Including CIBIL) Calculated?

Although each bureau has its own algorithm, the basic factors to ascertain credit scores remain similar:

1. Repayment History: Delayed or missed payments negatively affect your score.
2. Credit Utilization: If you use your credit card for a lot of transactions and almost hit the limit, it lowers your credit score.
3. Length of Credit History: A longer track record builds more trust.
4. Credit Mix: While calculating your credit score, your loan patterns are observed too to find a balance of secured and unsecured loans.
5. New Credit Inquiries: If you input too many loan or credit card applications in a short time, it can hurt your score.

Why Does Your Credit Score Matters?

Your credit score is used to determine the following:

• Assess if you are eligible for loans. Most banks set a minimum score requirement to approve a loan. The limit is generally set at 750+.
• To negotiate interest rates. A higher credit score means lower interest rates. 
• To offer higher credit limits to ones who have good credit scores. 
• A good score often unlocks instant approvals and special offers.

Which Credit Bureau Should You Check?

In India, RBI-licensed credit bureaus can be used to check your credit score. These include:

1. TransUnion CIBIL
2. Experian India
3. Equifax India
4. CRIF High Mark

You are entitled to one free credit report per bureau every year. It’s a good idea to check all of them because each bureau might have different data based on the information received from your bank or financial institution.

How to Improve Your Credit Score?

You can improve your credit score easily by being disciplines, here is what you need to do:

1. Pay EMIs and credit card bills on time
2. Keep your credit utilization below 30%
3. Avoid multiple loan applications in a short span
4. Maintain old credit accounts
5. Regularly monitor your credit report for errors

Final Thoughts

To sum up, credit score is a generic term, while CIBIL score is a specific type of credit score provided by TransUnion CIBIL. So if next time someone asks for your CIBIL score, you will know that they mean to check your credit score. Knowing the difference between credit score vs CIBIL score is important, but what matters more is maintaining a healthy credit profile regardless of the bureau. Regularly monitor your score, stay disciplined with repayments, and you’ll never have to worry about loan rejections.

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