An individual’s credit score is one of the most critical aspects of their financial lives. It is a crucial indicator of a person’s creditworthiness and often influences how likely they are to be approved for loans and other significant financial matters. In India, credit information companies (CICs) gather information from lenders to put together credit reports and scores for people based on their loans, repayments, and credit history.
The RBI has approved four major credit information companies in India. These include TransUnion CIBIL, Equifax India, Experian India, and CRIF High Mark. Out of these, the most popular and widely accepted CIC in the country is the CIBIL score. The second most popular is the Experian score. There is often a debate between the Experian credit score vs. CIBIL score and which is better.
In this article, we will delve into the Experian and CIBIL credit scores, the difference between CIBIL scores and Experian scores, and how to choose the right one for you.
What is a credit score, and why is it Important?
In India, a credit score typically refers to a three-digit number that displays an individual’s creditworthiness and ability to pay back loan amounts. Credit score ranges often vary depending on the CIC. For example, the two most popular CICs, Experian vs. CIBIL, have credit scores that range between 300 to 850 and 300 to 900, respectively.
A credit score of 750 or above is considered to be good. Lenders are likelier to approve loans and credit cards to individuals with higher credit scores and good credit reports. They may also offer better repayment terms and interest rates.
What is Experian?
Experian is a global credit information company (CIC) that operates in more than 32 countries. It offers services like credit risk management, targeting marketing offers, fraud prevention, and other data and analytical tools. Experian also collects information to create credit reports and scores for businesses and individuals.
In India, Experian is one of the most popular CICs. The Indian branch of Experian Credit Information Company of India was formally started in 2009. This CIC is recognised by the Securities and Exchange Board of India (SEBI). Experian’s credit scores vary, with some ranging from 300 to 850 and others between 300 and 900. Checking your credit score for Experian can be done for free online.
What is CIBIL?
TransUnion CIBIL is the most well-known and popular credit bureau in the country. It is also one of the oldest CICs in India, and most leading organisations are members of it. It collects, analyses, maintains, and compiles borrower information from various lenders.
This information is then used to create credit reports, credit scores for individuals, and CIBIL ranks and reports for organisations. CIBIL scores for individuals range from 300 to 900. You can check your CIBIL score online to gain insight into your credit history.
What is the Difference between Experian and CIBIL scores?
While both show organisations and individuals their credit scores and reports, your Experian credit score vs CIBIL score may differ. This could be caused by several reasons, which include:
1. Credit ranges
The most noticeable difference between an Experian score vs. CIBIL scoreis their credit ranges. Experian’s scores range from 300 to 850, while CIBIL’s scores range between 300 and 900. For Experian, a score above 700 is good, while a score above 800 is excellent. For CIBIL, a score higher than 700-750 is also considered good.
2. Recording methods
Another significant difference between CIBIL and Experian is their scoring models. Experian uses the FICO model to determine credit scores, widely used in other countries like the USA. It takes into account payment histories, credit mixes, and other factors. On the other hand, CIBIL’s scoring model is more suited to the financial environment in India.
3. Data
Experian uses data from various sources, including financial institutions, credit card companies, and public records. It also examines an individual’s payment history for rent, utility bills, and other factors. This information is then used to create and assess an image of a person’s financial habits.
CIBIL, on the other hand, primarily collects data from its member institutions., which are mostly limited to financial institutions. Due to CIBIL’s narrower scope, credit scores between the two CICs may differ.
4. Weightage assigned to different factors
While both Experian and CIBIL look at many common factors (like the length of a person’s credit history, utilisation ratios, credit payment history, and more), the weightage assigned to these factors varies between the two CICs. This difference could also affect the credit scores provided by them.
How can you address the differences between the CIBIL and Experian scores?
Due to the different ways CIBIL and Experian collect and calculate their data, there may often be discrepancies between the credit scores they provide. To rectify these, individuals can take specific steps:
– Keep the necessary documents handy. This could include payment receipts, account statements, and others.
– Each bureau has specified steps for submitting grievances. For example, Experian can be contacted via phone, email, or online to get support, and CIBIL offers online resources and contact points.
– Present your problem in detail, with the necessary proofs and documents.
– Remember to follow up on the issue every few days until it is resolved.
Which CIC credit score should you choose?
Experian and CIBIL are well-established, equally valid CICs. Lenders across the country widely accept their credit scores. Due to RBI mandates, both CICs receive the same information from lenders. However, most credit institutions consider CIBIL the standard in India, giving CIBIL scores an edge in the Indian market.
Summing up
Credit scores are crucial to an individual’s financial life. Healthy financial habits like creating and sticking to a monthly budget, repaying loans and credit cards on time, and having a low credit utilisation ratio can ensure your credit score remains high, whether you choose CIBIL or Experian.
Seeking guidance from experts can also help you achieve your financial goals. For expert advice and guidance regarding your finances, visit the Tata Capital website or download the app today!
04 December 2024
5 mins read
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