The credit score is the most vital aspect of your financial life. It reflects your creditworthiness and is likely to be a major part of all your financial decisions over the years. In India, there are four bureaus that offer the credit score. One is the credit score, the second is the Experian credit score, the third is the Equifax credit score, and the fourth is the CRIF Highmark credit score. Of these, the CIBIL credit bureau was the first to be established in 2002.
However, until the year 2005, the established bureaus did not exert as much influence on financial functions. It was only later that the Indian Parliament imposed the Credit Information Companies Act, 2005. As part of this Act, all lending institutions must share information with customers. The bureaus are approved by the Reserve Bank of India (RBI). Individuals can approach the credit bureaus to check their score as well as to solve grievances.
A popular Credit Information Company, Experian is a well-known organisation that is approved by the Securities and Exchange Board of India (SEBI). The company provides credit information services and detailed financial analysis reports. It helps both individuals and organisations make informed decisions. Experian has built a solid reputation over its 125 years of existence.
TransUnion CIBIL is among the oldest and most reputable Credit Information Companies in India. Nearly all leading organisations are members of the company. CIBIL collects, analyzes and maintains the information of different business entities. It offers a CIBIL rank and report for organisations. The rank ranges between 1 to 10 with 1 being the best and vice versa.
Experian and CIBIL have both earned their place in the Indian financial market. The two organisations have distinct algorithms to calculate and maintain a credit score. However, CIBIL is widely considered for its business credit scores. Thus, most leading banks and financial institutions continue to consult with CIBIL for their requirements.
CIBIL and Experian both carry just as much weight to influence your credit prospects. However, it is safe to say that CIBIL has a significant edge over Experian. This is because a large number of financial companies in the country rely on CIBIL. Additionally, CIBIL is an Indian-based establishment and it conveniently holds more weightage.
The lending company is bound to check the CIBIL score before checking the Experian score. The CIBIL score is essentially given more importance by lenders. Well, this is how important it is for you to keep a check on your CIBIL score. Staying updated and maintaining your best financial behaviour is your way to enjoy the best deals on credit products.
The CIBIL score and Experian score share a common denominator in the form of the score range. The credit score is standard and set by the Reserve Bank of India. At present, the score ranges between 300 and 900. This essentially means that you will be designated a score that lies between this range. A score higher than 750 is viewed as excellent by financial companies. As you must already know, the prospects of being granted a loan immediately increase when you have an excellent score.
Now that you know the importance of your credit score, you must make it a point to check the same regularly. Avail a Free Credit Report through Finserv MARKETS to gain an in-depth understanding of your financial health. Evaluate your credit details carefully to maintain the best credit score and to spot errors. Remember, striving for an incredible score will reward you in the form of lucrative loan deals.
If you do not have a credit history, your CIBIL or Experian score will be NA/NH.
Since personal loans are an unsecured loan, it increases the risk factor on part of the lender. This is why you will need to have a score that is in the higher range, preferably above 700.
The credit score is calculated by factors such as your repayment history, frequency of loan application, credit mix and more.