Understanding the Difference Between CIBIL Score and Credit Score

If you have ever applied for a loan or credit card, then you would have come across the terms “Credit Score” and “CIBIL Score”. Borrowers often wonder if the terms are one and the same. 

In this article, we help you understand what each term means and how they vary from each other.  

Key Factors Influencing Your CIBIL and Credit Score

The factors that influence your credit score are several. The most important contributing factors are

• Credit behavior
• Type of credit
• Repayment history
• Number of credit inquiries, and
• Credit utilization ratio

Steps to Elevate Your CIBIL Score Quickly

CIBIL score is the most trusted credit score by lenders. Hence, taking measures to improve your CIBIL score will help you secure a loan with ease. Here is what you can do to effectively improve your score.

Healthy Credit Mix: A balanced credit mix of secured and unsecured credit enhances your standing as a borrower. It signifies that you are careful with your loans.

Bill Repayment: Credit card bills or loan repayments have a major impact on your credit score. A single late payment or missed repayment will drastically reduce your CIBIL score. It might take longer for you to get your CIBIL score back up.

Multiple Loans: Lenders often consider your ability to repay the loan before approving it. If you are paying off multiple loans, then it might be difficult for you to handle another one. This increases your chances of missing a monthly payment. 

It is best to pay off existing loans before applying for a new one. You can also consolidate the loans into one to make it easier for you to repay them.

Loan Inquiries: There are two types of loan inquiries - Soft Inquiries and Hard Inquiries. In case you are applying for loans with multiple lenders, it might lead to several hard inquiries, which can potentially lower your credit score. 

This low credit score will lead to loan rejection. Hence, take time before applying for a new loan elsewhere. 

Each bureau has a unique credit rating system and several different parameters to measure a borrower’s credit worthiness. 
This often leads to different credit scores with different bureaus. Before applying for a loan, understand the credit score that your lender considers and take a look at your score before applying for the loan.

CIBIL score and credit score are different. CIBIL is one of the four major credit bureaus in the country, and the most prominent credit score. A majority of lenders factor in CIBIL score to approve the loan for a borrower. Regardless, maintaining a good CIBIL score or credit score is crucial to leading a financially healthy life.