CIBIL Score vs Credit Score: What's the Difference and Why It Matters?

If you have ever looked up the terms "Credit Score" or "CIBIL Score" on the internet, you must be confused about their relationship to each other. These terms have been used interchangeably by lenders, finance websites, and even by borrowers. This confusion stems from the belief that they mean the same thing.

Understanding the differences will not only help you take the right decisions but will also help you comprehend your credit history in the correct manner.

What Is a Credit Score?

Credit Score refers to a numeric value based on one’s creditworthiness. It is produced after the analysis of their borrowing habits, payment history, debts, credit usage, and other credit activities.

There are four credit bureaus in India that have been licensed by the Reserve Bank of India to produce credit scores:

• 1. TransUnion CIBIL

• 2. CRIF High Mark

• 3. Experian

• 4. Equifax

Each bureau uses its own scoring methodology, so your score may vary slightly across different bureaus, even though they are evaluating the same financial behavior. 

What Is a CIBIL Score?

A CIBIL Score is simply a specific type of credit score issued by TransUnion CIBIL. In other words, every CIBIL Score is a credit score, but not every credit score is a CIBIL Score.

Think of it this way:

• 1. Credit Score is the broader category.

• 2. The CIBIL Score is one version of that score, issued by a particular credit bureau.

This is similar to saying that every smartphone is a mobile phone, but not every mobile phone is an iPhone.

The term “CIBIL Score” is nothing but a credit score offered by TransUnion CIBIL. Therefore, all the CIBIL Scores are credit scores; however, all credit scores may not be CIBIL Scores.

Here’s how:

• Credit Score is the general name.

• A CIBIL Score is one kind of Credit Score offered by a particular credit rating agency.

This is akin to stating that all iPhones are mobile phones, yet not all mobile phones are iPhones.

Why Do People Confuse the Two?

The ambiguity arises since TransUnion CIBIL has been one of the leading credit bureaus in India for several years now. Therefore, many people (including both borrowers and creditors) use the phrase "CIBIL Score" interchangeably with "credit score" in informal settings.

Nonetheless, financial institutions can fetch your credit details from other credit bureaus based on their organizational guidelines. It is for this reason that your credit scores from various bureaus do not always coincide.

Which One Do Lenders Actually Consider?

There is no universal rule that states that a CIBIL Score is the one and only criterion used by the lenders to decide about a particular person. There are three other credit bureaus as well that have their license from the RBI, and lenders can refer to anyone while considering your loan application.

The important thing is your credit behavior and not the credit bureau that provides your score.

Why Understanding the Difference Is Important

Understanding the distinction will prevent you from experiencing confusion when you are reviewing your credit profile. Just because you have a slight difference in your score does not mean that there is anything wrong or that you have made a mistake. The various credit bureaus receive new information at different times.

The way you go about reviewing your credit is not just by looking at the number but by looking over the entire credit report.

Conclusion

Remembering the difference between them is quite simple. Credit Score is just a term that refers to a certain score in general, but a CIBIL Score is an actual kind of credit score provided by TransUnion CIBIL. 

No matter where you get your credit score from, it is important for you to keep up good financial practices to build healthy creditworthiness. In order to check your credit profile and credit report, visit PrimeScore

FAQs

1. Is every CIBIL Score a Credit Score?
Yes. A CIBIL Score is a type of Credit Score issued specifically by TransUnion CIBIL. 

2. Why are my Credit Scores different across bureaus?
Each credit bureau may use a slightly different scoring model and may receive updates from lenders at different times, leading to minor variations. 

3. Which credit score do banks prefer?
Many lenders in India commonly use TransUnion CIBIL, but banks and NBFCs can also use scores from Experian, Equifax, or CRIF High Mark depending on their policies. 

4. Should I check only my CIBIL Score?
It's helpful to monitor your overall credit profile. Reviewing your credit report along with your score gives a more complete understanding of your financial health.