Difference Between Credit Score and CIBIL Score

When we discuss loan products, we often come across terms like credit score and CIBIL score. However, do these terms refer to the same thing, or do they have distinct meanings? While they both assess your creditworthiness, there are significant differences in their calculation process and the way financial institutions utilise it. Let us go through this blog to understand the difference between credit score and CIBIL score.

A credit score is a numerical rating that lenders use to assess your creditworthiness. Multiple authorised companies in India and worldwide calculate these scores. The score typically ranges from 300 to 800 or 900, depending upon the credit card organisation. 

A higher score indicates greater reliability and responsibility as a borrower. Generally, a score of 750 or higher is considered good for most credit products, while a score above 800 is seen as excellent.

The Credit Information Bureau (India) Limited (CIBIL) provides CIBIL Score which is a credit rating that reflects your creditworthiness as a borrower. CIBIL is one of the four main credit bureaus in India, along with Experian, Equifax and CRIF Highmark, all approved by the Reserve Bank of India (RBI). 

A CIBIL Score is a three-digit number that shows your credit history and ability to repay loans. A higher CIBIL Score means you are at a lower credit risk, indicating that you can get loans more easily and at better interest rates.

Although Credit Score and CIBIL Score are related but are not exactly the same. Credit Score is a broader term and refers to a 3-digit number provided by different credit bureaus while, CIBIL score is a type of credit score which is provided by the Credit Information Bureau India Limited (CIBIL).

The following table gives a comprehensive comparison of credit score vs CIBIL score:

While there is a difference between CIBIL and credit scores, the ways to improve these scores for availing credit or loans are the same. Here are some practical tips you can consider to maintain a good credit score or CIBIL score

• Maintain Mix of Credit Types: Have a mix of different types of credit, like loans for homes or cars and credit cards, to show you can handle different debts responsibly.
• Timely Pay Your Bills: Always pay your credit card bills on time to prove you are good at managing money. You can use the automatic transfer feature to ensure payments of bills on time.
• Clear Off Outstanding Loans: Pay off any existing loans before applying for new ones to show you are financially responsible. It depicts you are financially responsible and thus boosts your credit or CIBIL score.
• Limit Loan or Credit Applications: Do not apply for multiple loans at once. This might make lenders think you are not good at managing money and thus can lower your credit score.
• Be Patient: If a lender says no to your loan request, wait a bit before applying again. Applying for loans too often can worsen your credit or CIBIL scores.

Grasping the difference between credit score and CIBIL score is crucial for maintaining good financial health and understanding credit management. Although both scores indicate creditworthiness, ‘credit score’ is a broad term used worldwide, whereas ‘CIBIL score’ refers specifically to the CIBIL credit rating system. Monitoring both your credit score and CIBIL score allows you to make informed decisions regarding credit acquisition, loan approvals, and obtaining favourable interest rates.