If you are among those who have checked their credit score on apps like Paisabazaar or any other and then get a different number from a bank, then you are not alone.
Many people question:
• Why is my CIBIL score different from my credit score shown online?
• Which one do banks check?
• Which one would that be, and which matters more?
Well, let’s break this down for you simply.
What is a credit score?
A credit score is a 3-digit number that reflects your creditworthiness.
Credit scores in India range from 300 to 900.
A credit score is calculated by credit bureaus depending on your behavior related to credit, including the following elements:
• Repayment history-on-time and late repayments
• Total outstanding debt
Credit utilization ratio
• An individual's credit history
• Number of applications for loans or credit cards (inquiries)
The better the credit score, the easier it is to:
• Better loan approval possibilities
• Lower interest rates
• Higher loan limits
What is a CIBIL score?
It is to be noted that the CIBIL score is a credit score that is calculated by TransUnion CIBIL.
CIBIL itself stands for 'Credit Information Bureau (India) Limited' and is one of the four credit bureaus approved by the RBI.
The other three Credit Bureaus in India are:
• CRIF High Mark
• Experian
• Equifax
Thus, when people talk of their CIBIL score, they are generally referring to the credit score offered by TransUnion CIBIL.
Credit Score and CIBIL Score: Are They Different?
Yes, and this is where the confusion begins.
• Credit score is generic.
• CIBIL score is a particular credit score that is provided by TransUnion CIBIL.
The various applications may display different credit scores because:
• They may pull data from different credit bureaus
• They may update data at different frequencies
• They may indicate an estimated score as opposed to an accurate bureau score
This is the reason why your credit score on Paisabazaar.com or any other site may not exactly match your CIBIL score.
Why Do Banks Prefer the CIBIL Score?
In most cases, banks primarily depend on the CIBIL report rather than scores displayed by third parties.
Though Paisabazaar and similar websites assist the users in understanding their credit ratings, banks and NBFCs use the credit report directly from TransUnion CIBIL during the processing of the loan.
That’s why:
• Your bank may state that your CIBIL score is satisfactory
• But an online platform might display a lower or different score
Why Can Credit Scores Vary Between Bureaus?
There are four credit bureaus operating in India, and each:
• They may receive slightly different data
• May update at different times
• Uses its own scoring algorithm
It is therefore perfectly natural for your score to fluctuate between:
• CIBIL
• Experian
• CRIF High Mark
• Equifax
Which is more important: Credit Score or CIBIL Score?
In Practical terms:
• CIBIL score matters more for bank loans
• Other credit scores are useful for tracking and awareness
If planning to apply for a loan or credit card, always center on:
• Maintaining a healthy repayment history
• Unable to miss any EMI
• Credit utilization control
Final Thoughts
• A CIBIL score is a type of credit score
• Scores can differ from one platform to another
• Banks use CIBIL and do not rely on third-party displays.
Small score differences are normal and expected. Replace concerns about what that exact number is on every different app with good credit habits. As time goes on, your score will even out among all bureaus.