Difference Between CIBIL Score and Credit Score

When evaluating an individual’s financial reliability, two terms frequently come across CIBIL score and credit score. Though often used interchangeably, they are not identical. In reality, a CIBIL score is a specific type of credit score. While "credit score" is a broad term, "CIBIL score" refers to one of the many credit scores issued by credit bureaus. In this article, we will explore their meaning, meanings, significance, and key differences to provide clarity.

What is a Credit Score?

A credit score is a three-digit numerical representation of an individual's creditworthiness, determined by credit bureaus. It typically ranges from 300 to 900, with a higher score indicating better credit health. Lenders use this score to evaluate an applicant's repayment ability before approving loans or credit cards.

Factors Affecting Credit Score

The following are the factors that affect a credit score: 

• Payment History: Timely repayment of loans and credit card bills boosts the score.
• Credit Utilisation Ratio: Lower utilisation of available credit is beneficial.
• Length of Credit History: A longer history of responsible credit usage improves the score.
• Types of Credit: A mix of secured and unsecured credit positively impacts the score.
• Number of Inquiries: Multiple loan or credit card applications within a short time can lower the score.

What is a CIBIL Score?

The CIBIL score is a specific type of credit score issued by TransUnion CIBIL, one of India's leading credit bureaus. It also ranges between 300 and 900, with a higher score increasing an individual’s possibility of securing loans at favourable terms.

Importance of CIBIL Score

The following are the benefits of a CIBIL score. 

• Most lenders in India prioritise the CIBIL score when evaluating loan applications.
• A score above 750 is generally considered good for loan approvals.
• Banks and financial institutions use it as a benchmark for determining interest rates and credit limits.

Key Differences Between CIBIL Score and Credit Score

Although both CIBIL score and credit score assess creditworthiness, they are not identical. Here are the key differences:

Aspects	CIBIL Score	Credit Score
Meaning	A credit score is given by the Credit Information Bureau (India) Limited (CIBIL) to assess a person’s creditworthiness.	It is a general term for scores given by multiple credit bureaus.
Issuer	Only provided by TransUnion CIBIL in India.	Provided by various agencies like Experian, Equifax, and CRIF High Mark.
Recognition	CIBIL score is widely accepted and used by Indian banks.	Other credit scores are also valid but may not be as widely used.
Usage in Lending	Most Indian lenders consider CIBIL scores first.	Lenders may use different credit scores based on preference.
Access for Individuals	Individuals can check their CIBIL score on the CIBIL website.	Other credit scores can be accessed through different bureaus.
Cost of Report	Some CIBIL reports are free, while detailed reports may require payment.	Other bureaus may offer free or paid credit score reports.
Computation Method	Calculated using TransUnion CIBIL’s proprietary algorithm.	The computation process varies depending on the credit bureau.

Which One is More Important?

In India, the CIBIL score carries greater significance as most lenders use it to assess loan eligibility. A higher score improves loan approval chances and secures better terms. However, other credit scores from bureaus like Experian and Equifax are also important, offering a broader view of financial health. Monitoring multiple scores ensures accuracy, helps detect errors, and strengthens overall creditworthiness. While CIBIL is the most widely used, maintaining a strong credit profile across all bureaus is essential for better financial opportunities.

How to Improve Your CIBIL Score and Credit Score

Improving a CIBIL score or any credit score requires disciplined financial behaviour. Here are some tips:

• Pay EMIs and Credit Card Bills on Time: Timely repayment of loans and credit card bills is one of the most crucial factors influencing your CIBIL score. 
• Maintain a Low Credit Utilisation Ratio: Your credit utilisation ratio is the percentage of your total credit limit that you use. High credit utilisation may indicate financial dependency on credit, which can negatively impact your score.
• Check Credit Reports Regularly: Errors or discrepancies in your credit report can unfairly lower your score. Review your report at least once every few months.

Conclusion

While CIBIL score is a specific type of credit score provided by TransUnion CIBIL, the term credit score is a broader concept that includes scores from multiple credit bureaus. Understanding these differences can help individuals manage their financial profiles effectively. To ensure better financial health, maintaining a good score across all credit bureaus is essential. Whether applying for a loan or a credit card, having a high credit score may potentially increase the chances of approval and favourable loan terms.