Description and Differentiation of Credit score and CIBIL

Banks, lenders, and credit unions check your creditworthiness before approving a loan. Your credit/CIBIL score is proportional to your (the borrower’s) creditworthiness in the lender’s eyes.

Credit Score

Credit scores that determine a person’s creditworthiness range between 300 and 900. The credit score is assessed by Fair Isaac Corporation, now also known as FICO. Experian, Equifax, and Transunion are other bureaus, but FICO is the most popular when it comes to credit scores.

Your credit score depends on your credit history. Factors to be kept in mind while calculating the credit scores of a person are their:

• Total opened accounts
• Payment history
• Repayment history
• Debts, if any
• Relevant credit card information such as how long they have held the cards, etc

CREDIT SCORE CATEGORY

Let’s have a look at the categories of credit scores;

• 800-900: excellent
• 740-799: very good
• 670-739: good
• 580-669: average
• 300-579: poor

NOTE

• If you are a borrower with a credit score of 640 or less, you are a Sub-Prime borrower and have to pay high- interest rates.
• With a credit score of 700 or higher,  you are a good borrower and you don’t have to pay high-interest rates on loans.
• If you have a credit score above 800 you fall into the category of excellent borrowers.

What could hurt your credit score?

Having and maintaining a good credit score is a skill, as there are certain factors that could harm your credit score; let’s have a look at them:

• Being late in making payments 
• Completely ignoring bills and avoiding deadlines for payments
• Bankruptcy
• Closing a credit card account
• Once a person decides to close a credit card-bearing account,  no matter how high the amount is in the account, it becomes, Rs.0. This is not good for a credit score.
• Applying for several credit cards at once.
• Having only one credit card.
• Not having a credit card at a good age.

 Improvement in credit score 

These dos and don’ts can help Improve your credit score.

• Paying bills on time
• Increasing the credit line
• Not closing credit card accounts even if not in much use
• Not ignoring the due dates of credit card bills
• Being careful while applying for credit cards and avoiding many applications

In general, a credit score is a three-digit number that can either be a huge expense or a large financial benefit.

CIBIL SCORE

CIBIL Score is a three-digit number ranging between 300 to 900 that helps Banks, lenders, and credit unions estimate a person’s creditworthiness. The credit information bureau (India) Limited (CIBIL) is the most popular credit information company licensed by the Reserve Bank of India(RBI). Other companies in the market estimate creditworthiness by calculating a score but CIBIL is the most popular one. Others are CRIF Highmark, Equifax, Experian, etc. Currently, CIBIL has 600 million Individual accounts and 32 million Business accounts. CIBIL is also a part of Transunion, an American Multinational Group. Building the CIBIL Score can take from 18 months to 36 months. A CIBIL Score is required by Indian lenders, Banks, and credit unions to approve a loan. A CIBIL report is also referred to as Credit Information.

Here are the categories of CIBIL scores

• 800-900: excellent
• 740-799: very good
• 670-739: good
• 580-669: average
• 300-579: poor

What could Hurt your CIBIL Score?

Getting and keeping a good CIBIL requires some expertise. There are a few things that could harm your CIBIL score such as the following.:

The criteria are pretty much the same for CIBIL Score and Credit Score,

• Late payments and ignoring deadlines
• Completely ignoring bills
• Bankruptcy
• Closing a credit card account 
• Once a person decides to close a credit card-bearing account,  no matter how high the amount is in the account, it becomes, Rs.0. This is not good for the CIBIL Score.
• Applying for several credit cards at once
• Having only one credit card
• Not having a credit card at a good age

How to improve your CIBIL scores

These dos and don’ts can help Improve your CIBIL score. The precautions are pretty much the same as for credit scores.

• Making on-time payments
• Increasing the credit line
• Not closing credit card accounts, even if not in much use 
• Not ignoring the due dates of credit card bills
• Being careful while applying for credit cards and avoiding many applications

The CIBIL Score is like a mirror to a person’s eligibility to meet a loan in India.  Take a closer look at the difference between a CIBIL score, and a credit score.

• Only the three-digit number given by the Transunion CIBIL can be considered as a CIBIL score, while the three-digit number given by any bureau other than Transunion CIBIL is considered the credit score. Examples of bureaus are Equifax, Experian, and CRIF Highmark.
• CIBIL has a completely different attribute towards calculating the number, different from the other bureaus.
• All the bureaus giving the credit score do not have a whole different algorithm to allot the number like CIBIL.

CIBIL SCORE	CREDIT SCORE
The three-digit number given by only The Transunion CIBIL can only be considered as a CIBIL score.	The three-digit number given by any other bureau than Transunion CIBIL is considered as the credit score.Examples of the bureau; are Equifax, Experian, and CRIF Highmark.
Has a whole different attribute towards the calculation of the number, different from the other bureaus.	All the bureaus giving the Credit score do not have a whole different algorithm to allot the number like CIBIL.

Final Thoughts

You must hold a good CIBIL/CREDIT SCORE, irrespective of what is being considered while applying for a loan in an unforeseen condition. You should follow the precautions suggested. Keeping in mind the DOs and DON’Ts will help you build that good score. A good credit score gives a good credit report. One should do all the required research about CIBIL and CREDIT score before starting on them. For that purpose, one must refer to advise from experts like https://www.piramalfinance.com/ to make an informed decision. With India developing rapidly, millennials are showing interest in handling finances in the best way possible.