Difference Between Credit Score and CIBIL Score

When applying for a loan, credit score becomes an important criterion to determine the credit behavior and credibility of the borrower. However, many people often get confused between credit score and CIBIL score and use it interchangeably. However, is credit score and CIBIL score the same or is there any difference? Let’s find out.

What is a Credit Score?

A credit score represents your credit behaviour. It is calculated after considering your total debt, total number of credit accounts, secured and unsecured debt mix, credit card repayment, credit card utilization, etc. Further, the credit score is also affected due to the number of applications for loans and hard inquiries.

What is a CIBIL Score?

CIBIL is an acronym for Credit Information Bureau (India) Limited and is one of India’s four major credit bureaus. It is linked with major financial institutions including banks, NBFC and housing finance companies. Other major credit bureaus include Equifax, CRIF Highmark and Experian and all these credit agencies are licensed by the Reserve Bank of India (RBI).

Difference between CIBIL vs Credit Score

Let’s understand the key differences between CIBIL score and credit score:

Why is Credit or CIBIL Score important?

Both the credit score and CIBIL score provide a quick insight into the repayment behaviour of the borrowers. Here’s why it becomes so important:

• Having a good credit score allows you to avail yourself of any financing facility seamlessly.
• You can get loans at affordable rates of interest.
• You can get a higher amount of loan if you have a good credit score as compared to when you have a low credit score
• You can get credit card approvals seamlessly
• You have better negotiating power when you have a good credit score

How to improve Credit or CIBIL Score?

There is no sure shot answer to what is best CIBIL score and how to achieve it but here are some useful tips, which, if followed over a period, can improve your credit score and CIBIL score:

• Timely Repayment: You should ensure that you repay your EMIs in a timely manner. Skipping your EMIs can dent your credit score significantly.
• Credit Utilisation Ratio: If you have a credit card, then you should ensure that the credit utilisation ratio does not exceed 50%. Exceeding 50% shows that you are highly dependent on credit facilities for your everyday needs.
• Avoid Hard Inquiries: You should not make multiple inquiries for your credit score or check it frequently. This can further dent your credit score.
• Avoid Multiple Loan Applications: You should avoid multiple loan applications, especially in the short run. If your application has been rejected once or twice, wait for some time and work on why it was rejected.
• Maintain a Healthy Credit Mix: You should maintain a healthy credit mix between secured and unsecured loans. Availing too many unsecured loans can harm your credit score.
• Monitor Your Credit Report: You should periodically monitor your credit report for any misinformation and discrepancies. If you find any mistake, you should immediately report it to the credit bureau or RBI.

In a Nutshell

There is a significant difference between credit score and CIBIL score. However, as they signify the same thing, both are often used interchangeably. What is good CIBIL score is subjective. Normally, a credit score above 750 is considered good but you can still get loans if you have a credit score around 700.

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