The terms “credit report” and “credit score” are sometimes used interchangeably, however they are not synonymous. A credit report is a complete description of your credit history, whereas a credit score is a three-digit figure that indicates your creditworthiness.
Let’s explore these terms in details.
What is Credit score?
A credit score represents a potential borrower’s creditworthiness. It is computed after considering the borrower’s credit history, which includes the number of credit accounts, total debt, and repayment history. In addition, the number of enquires made (applications for a loan or credit card) is taken into account when computing a credit score.
The score, which is part of an essential metric system, is used by lenders to show the likelihood of the borrower repaying the debt on time. Notably, having a high credit score increases your chances of acquiring a loan or a credit card. Similarly, a low credit score might quickly turn off lenders. A credit score is used not only as a risk grading tool for loan evaluation, but also to set interest rates. As a result, your credit score might help you save a lot of money when applying for a loan from a financial institution.
What is CIBIL Score?
A CIBIL score is a credit score provided by TransUnion CIBIL, one of three credit bureaus in India that keeps track of credit-related activity.
The bureau provides security against identity theft and other potential fraud by providing a comprehensive picture of one’s credit history and financial reputation. Not only that, but the bureau provides sophisticated information solutions for organisations, allowing them to make educated decisions while keeping dangers at bay.
How does CIBIL work?
The CIBIL score is a three-digit numeric summary of a consumer’s credit history that provides peeks into their credit profile. A company or individual is assigned a score between 300 and 900. As your CIBIL score approaches 900, your chances of loan approval improve. It should be mentioned that any credit score higher than 750 is considered good by the credit rating agency. This means that a CIBIL score between 750 and 900 will almost certainly lead lenders to evaluate and approve your loan application. However, as you move away from the 750 mark, all hope fades.
You may simply obtain your CIBIL score on the credit bureau’s official website (www.cibil.com) for free or by accepting a membership plan. While the free subscription allows you to check your current CIBIL report once per year, the paying plans are a better value.
What is CIBIL Report?
A CIBIL report is a comprehensive record that provides lenders with critical information about a person’s credit history and credit score. This report is produced by CIBIL, an Indian credit agency that collects and stores credit and financial data about individuals and businesses. The CIBIL report contains information about a person’s credit card and loan accounts, such as payment history, outstanding balances, and missed payments. Lenders use this information to determine whether to issue a loan or credit card based on an applicant’s creditworthiness. To be eligible for credit, you must maintain a strong CIBIL score and report.
Besides the user’s personal information, the CIBIL Bureau considers the following information when generating a CIBIL report:
- Loan data and other credit-related information
- Earnings information for the user
- Credit card information
- Credit card cancellation information
- Total number of difficult enquiries
A CIBIL report that is error-free can raise a person’s CIBIL score. A CIBIL report that contains inaccuracies or remarks from banks or lenders, on the other hand, can have a negative impact on the score. It is advised that the CIBIL report be reviewed at least twice a year to uncover any faults or inaccuracies that can be challenged.
What information can be found in the CIBIL report?
The CIBIL report is divided into following sections:
- Credit score: CIBIL determines your credit score based on your credit behaviour as evidenced in your CIBIL report’s ‘Accounts’ and ‘Enquiries’ sections. Your CIBIL score spans from 300 to 900, with a score of 700 considered excellent.
- Personal information: Your personal information, such as your name, date of birth, gender, PAN number, voter’s ID, and so on, is recorded in this area.
- Contact information: This section contains information on your contact numbers and addresses. Depending on the information gathered from various financial institutions, it may report several numbers and addresses.
- Employment information: This part includes your monthly income as reported by banks or other financial institutions.
- Account information: This part contains a complete account of the credit facilities that you have used. It comprises lender names, credit facility kinds (such as home loan, vehicle loan, personal loan, overdraft, and so on), account numbers, ownership details, dates of opening and last payment, loan amounts, current balances, and a month-to-month record of your payments for up to three years.
- Details of your inquiry: This part shows how many times banks or financial institutions have checked your credit report for accuracy.
Difference between CIBIL Score and CIBIL Report
Understanding the CIBIL report should be simple now that you know what the CIBIL score is. Your CIBIL report is a report generated by CIBIL that contains information about your CIBIL score, debt accounts, and payments. It comprises information such as previous loans, credit card debts, and so on, as well as how you repaid them. CIBIL generates your CIBIL score using all of this information.
Aside from debt information, it also includes personal information such as your name, address, Permanent Account Number (PAN), contact information, and so on. Furthermore, if you apply for a new loan or credit card, the lender notifies CIBIL, and all such applications are also noted in your CIBIL report. The other three credit bureaus, like CIBIL, provide their own credit reports.
What is a good CIBIL credit score?
It is considered an excellent credit score if your CIBIL credit score is greater than 750. If your CIBIL credit score is greater than 750, your report is considered perfect.
What does a score of 1 on my CIBIL credit report mean?
If you have a credit score of 1 on your CIBIL credit report, that signifies you have no credit history at all. You can begin building your credit history by applying for a credit card or a loan. Having a credit history is highly important since it allows you to create trust with lenders and banks in the event that you need credit in the future.