Credit scores have now become a vital part of the lending ecosystem. Whenever an individual applies for a loan or credit card, the lender has several different kinds of credit scores that they can use to determine the creditworthiness of the applicant. In other words, these credit scores help lenders determine the likelihood that a given applicant will repay their debts.
Credit score is calculated using credit reports prepared by organisations known as credit bureaus. Each credit bureau typically has its own proprietary algorithm that it uses to calculate its credit score.
There are four main credit bureaus in India: Experian, CRIF High Mark, TransUnion CIBIL, and Equifax. Each of these bureaus has its own credit score as well, all of which are quite widely used in India.
Let’s take a detailed look at the Experian score and the CRIF High Mark score individually, and then compare them with each other in various respects.
The Experian Credit Score is calculated by a credit bureau named Experian. This score ranges in value between 300 and 900. Experian is an international company that is listed on several stock exchanges.
The CRIF High Mark Credit Score is calculated by a credit bureau named CRIF High Mark Credit Information Services. This score also ranges in value between 300 and 900. CRIF High Mark Credit Information Services was founded in 2005, and is headquartered in Mumbai.
These two kinds of credit scores are very similar to each other. The differences between them are relatively minor.
Basically, as mentioned above, the algorithms used to calculate them are almost certainly different, as they are proprietary. Moreover, each credit bureau has its own network of lenders, banks, and NBFCs that provide credit information to it. Thus, depending on the differences between the networks that Experian and CRIF High Mark have, the raw information that they use to calculate their credit scores might be slightly different.
What is considered to be a good score also depends on the type of credit score in question. For an Experian score, a value of 780 or higher would be considered a good score, while for a CRIF High Mark score, its value would only need to be 700 or higher.
The Experian and CRIF High Mark credit scores have much more in common than not, by virtue of both of them being credit scores with the same ultimate purpose.
They are both three-digit numbers that represent the creditworthiness of an individual or company: the higher the number, the better.
Moreover, the criteria that are used to calculate both score are more or less the same, namely:
Repayment history: Whether or not an individual or company has a history of paying back its debts in a timely manner.
Credit utilisation ratio: The extent to which an individual or company typically uses its lines of credit.
Length of credit history: For how long an individual or company has had an open line of credit.
Total debt: The total amount of dues that an individual or company owes at a given point in time.
New credit card/loan applications: If there are any recent applications made for a credit card or loan.
In addition, both the companies behind these credit scores received their licence to operate as a credit bureau from the RBI in 2010.
It is not the case that there is a substantial difference in the importance of these two credit scores:
Both of them have an RBI licence.
Both of them have a very large network of lenders, banks, and NBFCs who provide them with credit information.
Both of them are widely used on a regular basis.
The companies behind both of them are well-regarded and considered to be trustworthy.
Thus, there is no real basis to say that one of these scores is “better” than the other. Both are equally valid, and both are useful for lenders and credit applicants.