Whenever you apply for a credit card or a loan at banks or NBFCs they perform a credit check and determine your creditworthiness. It is calculated on the basis of two factors: CIBIL score and CIBIL report. Although they both complement each other and serve the same purpose (helping lenders determine credit lending risks), they are different from each other in many ways. To understand these differences, you must first know what these two credit evaluation factors are exactly.
There are many credit bureaus of India that maintain and provide credit scores of different individuals to the banks and other financial institutions. Some of the popular credit bureaus include CIBIL, Equifax India, Experian India, etc. These bureaus analyse your credit history, payment patterns, credit utilization habits, etc. for your credit score calculation. Generally speaking, the higher is your score the greater is your creditworthiness. In other words, if you have a high credit score then you are considered as a responsible credit user, and lenders will find it easy to trust you with lending a loan or approving a credit card. On the other hand, if your score is less than average then your credit utilization behaviour is not considered satisfactory, and thus lenders will shy from lending you credit. Even if you are able to get a loan with a poor credit score you will likely have to pay a high interest than normal.
As the name suggests, your credit report contains the summary of your credit-related activities. Thus, it covers your loan payments, credit card bill payments, existing debt, etc. It also contains your personal information- name, address, contact information, bank account information etc.
The CIBIL report is divided into the following sections:
In this section the report presents your personal details, such as name, address, phone no., voter ID number, PAN number, passport number, etc.
As the name suggest the “Employment Information” section contains your employment details. It includes your current occupation and income. You may find the information here outdated, as this section is updated when you get a loan for the first time. So, if it has been many years since then and you have switched jobs then CIBIL may not have updated the same on the report. You have to inform them of the same to make the changes.
It is one of the most important sections of your credit report, as it contains your financial details which matter the most to the lenders. Section fields include your credit limit, pending debt, no. of collaterals and their values, etc.
This is another important section of the credit report. It contains the list of all the enquiries that have been made by the banks and NBFCs in the past 1-2 years. If a lot of enquires have been made in a short period of time it shows two things- that you are credit hungry, and that many lenders have already rejected your applications. Thus, it raises a red flag and affects your score negatively.
More on the Differences
It must be clear to you by now how a credit score is different from credit report. However, there is another major difference that must be pointed out. While the format of the credit reports followed by most credit bureau is similar, there scoring system can vary greatly. Thus, it is unlikely that you will get the same score from different bureaus. There are two reasons behind it-
- Different credit bureaus use a different formula for scoring. Thus, one bureau might deduct 10 points on every delayed payment in the past 6 months, while other might deduct 20.
- The floors and ceilings on the scoring spectrum vary from one credit bureau to another. For instance, CIBIL provides a score ranging between 300 to 900 and Experian from 1 to 1000.
No matter which credit bureau your lender has partnered with, developing good credit utilization habits is extremely important. Make sure you check your credit report from time to time, especially because it’s easy to get a free credit report India. Pay your payments on time, and don’t use credit cards excessively. Even little things like these can make a big difference to your credit score.