Confused about the difference between your credit report and credit score? The following sections will help you to get a better understanding of these two. To the untrained eye, these two items look more or less one and the same. However, if observed closely, one can see the differences in how they impact and represent a person’s financial health.
What is CIBIL?
CIBIL, founded in 2000, stands for Credit Information Bureau (India) Limited and is the country’s primary credit information company. The prime function of CIBIL is to maintain detailed records of the credit activities of not only individuals but also companies and institutions. These records by CIBIL are collected through the periodic information it receives through member banks and financial institutions.
The terms CIBIL score and CIBIL report discussed here are with respect to the credit activities of individuals and are handled by the Consumer Bureau of CIBIL.
What is CIBIL Report?
As the name indicates, a credit report is a report which has all the details such as the history of one’s debt accounts and their payments. It generally comprises credit card payments, and various loans such as automotive loans, home loans, and student loans. Additionally, they contain the status of those loans such as doubtful, settled, etc.
In simple words, a credit report is a report card of one’s debt history. It also includes a range of personal information such as name and address, PAN card details, known business address and phone number among others. Your credit report will also include your loan/credit card details, date of loan taken, current balances, and information about whether a person paid his/her bills on time, as well as if the accounts are in arrears.
A credit report will also list all the inquiries that have been for new credit. Basically, a credit report records how well a person has kept up with his/her payment agreements with various current and previous creditors as well as their current balances.
What is CIBIL Score?
On the other hand, a credit score is a statistically generated three digit number between 300 and 900, which would be generated based on the person’s credit history as contained in their credit report. It would be generated from a person’s payment history, accounts owed, length of credit history, types of credit, and also new credit details.
A CIBIL score is different from a CIBIL report in the fact that while a CIBIL score is a numerical expression derived as a result of processing credit information, a CIBIL report is a comprehensive document containing the overall credit information. This means that credit scores are just numbers that indicate the creditworthiness of customers whereas credit reports are documents that have detailed information about their credit history.
Difference Between CIBIL Score and CIBIL Report
Therefore, based on the above descriptions of the CIBIL score and CIBIL report, we can conclude that CIBIL scores are included in and are an essential component of CIBIL reports. Without a CIBIL report, there would be no CIBIL score. While a CIBIL score is a numerical representation of your overall credit history, the CIBIL report is a comprehensive and detailed account of the same.
However, with respect to new lenders, both your CIBIL score and CIBIL report would have a significant impact on whether or not your loan application gets accepted. Most lenders use specific CIBIL scores as an entry threshold for loan application consideration. Good CIBIL scores not only guarantee qualifying you for your desired loan but also come with other attractive features offered by most lenders. These benefits include lower interest rates, higher loan amounts, simpler documentation process and quicker approval times.
Once your CIBIL score qualifies for your desired loan, your CIBIL reports may also be reviewed to formulate a comprehensive idea of your spending behavior and credit trustworthiness. To ensure that your next credit application goes smoothly, it is recommended that you check your CIBIL report as well as your CIBIL score every 3 to 6 months.
In order to find out how your financial decisions can be improved to enhance your credit history, make sure to check out your CIBIL report online. Apart from your CIBIL score, you can also download a financial report online that offers you a complete, personalized overview of your financial health and stability.
How Are They Connected?
A higher credit score on your report represents a lower credit risk for new loans provided to the individual and vice versa. Therefore higher your credit score, the greater is your credit worthiness as determined by the lender and the lower the perceived risk of lending you more money. So while your credit report contains your entire credit history, your credit score is a summation of the same and acts as a snapshot of your credit history with respect to all past and current debt instruments.
When you apply for a loan or credit card, it is extremely likely that the prospective lender will pull your credit score. That will help them determine the prospective borrower’s credit risk. The closer your score is to 900, the more the chances of your loan or credit card application being approved by the bank. Many companies have pre-set standards on loan issue matters. If the credit score is within a certain range, the lender may offer loan at a preferred (lower) interest rate or provide you with a credit card with a higher credit limit, though all other terms & conditions will most likely be the same.
Who Provides CIBIL Score and CIBIL Reports in India
In India, credit reports are provided by various institutions, but the most commonly used is the one provided by CIBIL TransUnion. Other leading credit reporting organizations that currently operate in India include High Mark Credit Information Services, Experian Credit Information Co. of India and Equifax Credit Information Services. Apart from these agencies that operate in India currently, more companies may be allowed into the Indian market in the recent future. For simplicity and because it is the most commonly used one, we mainly consider the CIBIL TransUnion credit report and the corresponding credit score as the one being discussed.
How to Access Credit Report and Credit Score?
One can access their credit report and credit score through any of the three credit reporting agencies that operate in India. Such a request can be made by visiting the website of the respective credit reporting agency and following the instructions such as filling up the online request form and sending it along with a draft or cheque to cover the processing fees. It is advisable that you check your credit score and credit report at least once a year and especially before applying for a new loan or credit card. Keep checking the credit report regularly for any possible errors, make payments on time and avoid using more than 30% of your total credit card limit, to ensure that your credit score doesn’t go way down compared to the average score.