CIBIL Score Check: How Does Credit Score Work?

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Updated: Jan 30, 2023, 11:23am

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The parameters that determine the credibility of a person to return debt based on their credit history is known as the credit score. With the help of the credit score companies conclude if an applicant can be lent money or not in the modern banking system. The same is true for pre-approved loan offers for customers who the bank sees as prospective consumers.

A set of companies are authorized to analyze credit scores as per the financial transactions done by an individual in the past. Financial institutions partner with these companies to get the detailed information about the applicants. This process is called checking the credit score. Here’s a guide on how credit score is checked and the parameters that impact an individual’s credit score card.

Credit Rating Companies Present in India

In India there are four authorized companies that can provide you with your credit report including your credit rating. These companies have been licenced by the Reserve Bank of India and have access to all the legitimate data of an individual or an organization.

TransUnion CIBIL

Also known as just CIBIL score is the most popular credit score rating in India. It is an American multinational that has become quite popular in India as most financial institutions have partnered with them.

Equifax

Equifax India gathers data for individuals and organizations in a very reader friendly lucid manner. The company is formed as a collaboration between American and Indian companies.

Experian

Experian, an international credit bureau which has its headquarters in Ireland, provides credit ratings and scores similar to other credit bureaus in India. The company’s latest pivot into providing credit score for free on WhatsApp, which is quite popular in India, and a detailed credit report on your email ID is noteworthy.

CRIF Highmark

CRIF provides credit ratings for individuals and organizations. This is a purely Indian company as opposed to the other three that are international or internationally-affiliated. .

CRIF has the world’s largest microfinance credit database.

How can we get credit rating?

All the four bureaus provide the credit score of individuals for free once a year and there are a few websites that offer this facility for free to the user. One can login into the websites of any of the credit bureaus and request for it by entering details including the Aadhar card, PAN number, among others.

Apart from the usual, Experian has floated a mobile number on which one has to Whatsapp their details and the credit score is sent for free without any cap on the number of times the credit score can be requested.

What is the Credit Score Range For CIBIL?

A credit score is a three-digit numerical rating based on the credit history of an individual generally between 300 to 900, but it may vary slightly depending on the source organization. This data is collated by authorized agencies for individuals and is considered to be extremely confidential. The only way of getting this data is through licensed agencies by submitting one’s PAN card number.

Below tables show the rating criteria of all the four credit bureaus.

CIBIL RangeRating
300-499Poor
500-649Average
650-749Good
750-900Excellent

The CIBIL score range as we can see in the above chart is the assessment of a borrower’s trustworthiness.

  • Applicants with a CIBIL score above 750, can get a loan at the minimum interest rates from all financial institutions. They can get all kinds of credit cards in accordance with their monthly income.
  • People between 650 to 749 get the loans but at a higher rate of interest, and very easily get a credit card of their choice, again in accordance with the monthly income.
  • People with a CIBIL score between 500 to 649 may get a loan with great difficulty and at a maximum rate of interest. They can still get a credit card.
  • People with a CIBIL score between 300-499 can not get a loan or a credit card. The only places they may get a loan are private money lenders or companies which give loans on the basis of quadrilaterals at a very high rate of interest. They can not get a credit card.They can only get a credit card with the backing of an FD in the bank, in case of any non payment of dues the bank will cease the money kept in the FD.

Credit Score Range For Other Credit Bureaus In India

Credit score range differs a little from company to company but the parameters used to determine it are the same in all the bureaus. Scores are divided into various categories from poor to excellent.

Companies using this data check the category of the rating and then proceed further to give a loan or a credit card. Following are the categories and ranges to determine the credit score.

Equifax RangeRating
280-559Poor
560-659Fair
660-724Good
725-759Very Good
760-850Excellent
Experian RangeRating
300-549Poor
550-649Fair
650-749Good
750-799Very Good
800-850 Excellent
CRIF Highmark RangeRating
300-549Low
550-649Medium
650-749High
750-900Excellent
  • The other three credit bureaus have their own range of rating an individual. Though, the structure of rating is more or less the same, with a little distinction in  the range.
  • CIBIL and CRIF have become more popular amongst financial institutions, like banks.
  • Equifax and Experian both are international players with a good reputation but still trying to pick up in the Indian markets.
  • Banks or any company can use the services of any of these bureaus, the selection of a bureau is entirely at the discretion of the users. They all have the same level of sophistication and database.

Factors Used to Calculate Credit Score

As we have already discussed that the licenced credit bureaus have access to financial data of individuals and accordingly they consider the following things to calculate the credit score of an individuals:

  • Active Credit Accounts: Mortgages, credit cards, overdrafts, loans, late payments, missed payments and defaults.
  • Credit agreements: Mobile phone contracts, car finance, home finance.
  • Payments to Buy Now Pay Later Services: This allows users to spread the cost of a purchase interest-free over a number of months and can influence the credit score from as early as 2023.
  • Recently closed or settled credit accounts.
  • Public Record Information:
    • County Court Judgments (CCJs) against the applicants
    • Bankruptcies
    • Individual Voluntary Arrangements (IVAs)
    • Any committed frauds or have been the subject of fraud through
    • Stolen identity or a fraud identity
    • Name in the electoral register

Frequently Asked Questions (FAQs)

Is the CIBIL score always accurate?

There have been inaccuracies, which can be categorized as rare, in the past hence one has to thoroughly check the credit report given the involvement of multiple parties. Credit bureaus gather information from various organizations and there can be occasional misinformation at their part. Such an event is bound to happen when there are payment-related disputes.

When an individual asks for their credit score information, it is very transparently given to them. This report mentions all the transactions done by that individual and those can be cross-checked. It is always advisable to check if the transactions done in the credit report have been done by you or the figures provided by your credit card company are exaggerated. In case of such disputes the credit bureaus can be contacted and generally the corrections can be done. Credit bureaus can be contacted by messaging them on their website in the complaints sections.

What all needs to be cross-checked in a credit report?

Can checking the CIBIL score hamper your credit score?

Can we hide our accounts from credit bureaus?

Does the credit report have personal information as well?

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