Having a strong credit score is crucial when applying for a loan and securing favourable borrowing terms. Many people assume that a CIBIL score and a credit score are the same. While they are similar in many respects, there are some notable differences between the two.

Understanding the difference between a CIBIL score and a credit score is essential before taking out loans or exploring other forms of credit. In this article, we’ll demystify these terms and address some common misconceptions surrounding them.

What Is a CIBIL Score?

CIBIL stands for Credit Information Bureau (India) Limited and is one of the four major credit bureaus in India, along with Experian, Equifax, and CRIF High Mark. A CIBIL score is a three-digit number that typically ranges between 300 and 900. Higher CIBIL scores indicate better creditworthiness. Most financial institutions in India consider a CIBIL score of 700 or above as favourable when evaluating a loan application, though this threshold may vary based on the type of loan and the lender’s policy.

The CIBIL score is calculated based on several factors, including your credit history, outstanding debt, credit utilisation, and the types of credit you hold. It gives lenders an indication of how you’ve managed credit in the past and helps them assess the risk of lending to you.

What Is a Credit Score?

A credit score is a measure of your creditworthiness generated by any authorised credit bureau – not just CIBIL. Each bureau uses its own algorithm and data sources to calculate your score, which is typically a three-digit number similar in range to the CIBIL score. Although the underlying principles are the same (such as repayment history, credit utilisation, and credit mix), your score may vary slightly depending on the bureau, due to differences in reporting and evaluation models.

The main credit score and CIBIL score difference is that while the latter is a specific score issued by CIBIL, the term “credit score” is a broader concept and may refer to scores issued by any credit bureau.

Key Differences Between CIBIL Score and Credit Score

Common Misconceptions About CIBIL and Credit Scores

Here are some of the most common misconceptions about CIBIL or credit scores, and the truth behind them:

Regularly Checking Your Credit Score Will Lower It

When you check your own credit score, it’s considered a soft enquiry. This does not affect your score in any way. Only hard enquiries, which are made by lenders when you apply for a loan or credit, can cause a temporary dip. It’s important to monitor your score regularly to detect errors or fraudulent activity and take corrective action promptly.

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Credit Score Is the Sole Deciding Factor

While your credit score plays an important role, it’s not the only factor lenders consider. Lending institutions also assess your income level, employment status, existing debt obligations, repayment capacity, and many other parameters. A good score improves your chances, but it doesn’t guarantee approval.

Anyone Can Check Your CIBIL Score

Your CIBIL score is confidential. Only you have access to it, and lenders can check it with your consent – typically during a loan or credit application process.

Credit Score Depends on Your Annual Income

Your income does not directly impact your credit score. The score is based on your borrowing habits, not how much you earn. A high income does not guarantee a high score, and a lower income does not necessarily mean a low score. What matters is how responsibly you manage your borrowing.

Clearing Off Debt Will Remove the Transaction from Your Credit Report

While it is a good thing to pay off a loan, it does not erase the loan history. The status will be updated to ‘closed’ or ‘settled’ and reflect that the debt was repaid. This history is important for building your credit profile and shows responsible repayment behaviour over time.

Conclusion

People often confuse CIBIL scores with credit scores, so it’s important to understand the differences to make informed financial decisions. A CIBIL score is a specific type of credit score issued by the TransUnion CIBIL bureau, whereas a credit score can be provided by any licensed credit bureau in India. Regardless of the source, maintaining a strong credit score is key to securing loans on favourable terms.

At SMFG Grihashakti, you need a minimum CIBIL/credit score of 700 to apply for home loans of up to INR 1 crore*. Check your eligibility and apply online today to avail of interest rates starting from only 10%* per annum!