Difference between Credit score and CIBIL scoreGet clarity on the concepts of Credit score and CIBIL score when you are taking anew loan or applying for a personal loan for the first time. Universally, a Credit score or CIBIL score is a very important factor to consider when applying for a personal loan, credit card or home loan. The chances of loan rejection are high, if your credit score or CIBIL score is low. Hence, keep a check of your credit score at intervals.
What is a CIBIL Score?
The Credit Information Bureau of India Limited (CIBIL) is one of the popular among the four credit information companies. CIBIL is one of the rating agencies and the other three bureaus are Equifax, CRIF Highmark and Experian. A credit score assessed by any of the four credit bureaus is equally valid. It varies from organization to organization as to which rating agency’s credit score they consider.
All credit bureaus are licensed by the Reserve Bank of India (RBI). The Credit score evaluated by CIBIL is known as a CIBIL score. CIBIL maintains credit history, ratings and ranges from 300 to 900. The closer your score is to 900, the better your credit rating stands. A CIBIL score of an applicant is decided by the credit bureau of India limited by viewing the borrower's credit history and repayment method.
TransUnion CIBIL is a credit bureau company or a credit rating agency that assesses the credit history of the borrowers and maintains records of all finance-related activities of companies as well as individuals including credit cards and loans, and decides the CIBIL score or credit score of the loan applicant.
What is a credit score?
A credit score is an important 3-digit metric used by financial companies/lenders to evaluate the borrower’s creditworthiness. Credit score or CIBIL score should be between 300-900 to avail a loan or credit card instantly. A decent credit score makes all the difference in your credit report and influences the lender for a fast loan approval.
If your credit or CIBIL score is under the desired slot, your loan application may get delayed. So, it becomes essential to raise and maintain your credit score or CIBIL score in the following ways:
- Timely repayment of debts-How timely you pay your credit card bills and a loan affects your credits score more than any other factor. So not keeping your payments pending and paying off on time every month is the best way to raise your credit score.
- Credit history age- This is the number of years that have passed since you opened your first credit account. You need to have seven years of credit history to hold a good credit score. You may have a spotless payment history in these 7 years which can be the reason for an excellent credit score.
- Limit credit utilization-Try to limit your expenses by not using credit cards for everything. By holding back, the credit card usage, there will be a positive influence on your credit score. Keeping your monthly credit bills low will reflect a healthy credit score.
- Dispute credit report errors- Track your credit reports at intervals to check for errors, if any. Though, this is a rare case which can be experienced by borrowers at times. When you have followed all the rules of building up a good credit score and still the results are low, you should check for discrepancies, if any.
- Payoff past dues-Do not be in a hurry to register fora new credit without paying off the past balance, it will affect your credit score negatively.
Hence, always follow the above factors to create a healthy Credit or CIBIL score. Higher the CIBIL score, chances of quick loan approval are higher.