People resort to taking credit cards and loans to meet various financial needs. For example, loans enable them to buy a car or a home. Similarly, credit cards help them to book movie tickets or the latest smartphones, and so on.
This is one side of the coin. The other side of the coin is: You ought to have a sound credit score and credit report. These are relied on by various banks and other lending agencies to judge your financial soundness. It gives them a view of your credit history before they grant a loan, for instance.
Generally, credit reports are issued by credit bureaus, Credit Information Companies (CICs), authorized by the Reserve Bank of India under the Credit Information Companies (Regulation) Act, 2005.
CIBIL and Experian are the most popular agencies. The bureau reports issued by them are used by financial institutions like banks as proof of eligibility for loans or credit cards.
Also Read: Know About All The Factors Affecting Your Cibil Score
What is CIBIL in the first place?
CIBIL is an authorized company registered under the Credit Information Companies (Regulation) Act, 2005. They are responsible for providing a credit score or a credit rating based on your credit history with different credit institutions and member banks.
CIBIL enjoys the distinction of being India’s top-notch credit information bureau.
Lenders give immense importance to CIBIL scores. They consider the score while sanctioning a loan or a credit card. This score, which is essentially a numeric summary, sheds light on your repayment behavior and credit history.
Typically speaking, this number is a 3-digit one. It ranges between 300 and 900. Your score reflects your capabilities of repaying the borrowed amount. A score between 750 and 900 is an ideal score.
The score consists of 4 factors:
- Credit Exposure 25%
- Credit Type and Duration 25%
- Payment History 30%
- Other Factors 20%
Also Read: Best-Tested Ways To Improve Your Cibil Score
What is Experian?
They are one of the 4 credit information bureaus operating in India. They are credited for offering the Experian Credit Information Report or Experian CIR. The report in question consists of various details like your loans, credit cards, identity information, credit accounts, payments, and much more.
Different banks and lending institutions provide information about their consumers to the agency. It includes the consumer’s address, name, address, and other individual-centric identifying information, like PAN card number, date of birth, etc.
The agency makes use of such information to record the credit information of an individual consumer. It involves a lot of information like the date of the loan, payment history, type of borrowing, current balance, payment history, recorded defaults, if any, and much more.
Whenever a lender institution like a bank makes an inquiry about a consumer, it provides a confirmation with regard to matters like the type of request made, amount, and more.
Experian Credit Score plays a significant role in determining whether your loan or credit card request will be accepted or not. This score comes in the form of a numeric summary.
It contains valuable information pertaining to your history surrounding existing or previous credit cards or loans based on your application of the same. The rule of the game is simple – the higher the score, the better the chances of getting a loan or credit card sanctioned.
Presently, it is carrying out its operations in India via two of its entities:
- Experian Services India Pvt Ltd
- Experian Credit Information Company of India Pvt Ltd
Also Read: How To Check Your Cibil Score Using Your Pan Card
Difference Between Cibil Score and Experian Score
Yes, both CIBIL Vs Experian scores are of equal importance. Nevertheless, there are certain differences between them, like:
| CIBIL Score | Experian Score |
| CIBIL mostly gathers information about credit from banks and financial institutions that are its members. Since it focuses on a limited set of data, there could be some missing details in a person’s credit history, which might impact their CIBIL score. | Experian gathers information from many places like credit card companies, banks, and other money-related businesses. They also look at different kinds of data, like how people pay rent, utility bills, and public records. By collecting all this info, they can get a better overall view of how a person handles their credit. |
| CIBIL, uses the model named Empirica | Experian uses the FIFO algorithm for credit scoring purposes. It terms the mechanism employed as FICO or FICO II. |
| Different leading financial institutions and banks give preference to CIBIL for different business loans. CIBIL caters mostly to domestic money lenders. Currently, it has 35 banks and NBFC within its fold. | Experian, on the other hand, deals with a lot of international financial entities like Morgan Stanley, MBNA, Barclays, HSBC, and Nationwide. |
| CIBIL was founded in 2000. In its formative years, it was founded by the Reserve Bank of India. Subsequently, it partnered with the well-known Chicago-based TransUnion International Inc. This made CIBIL the first credit bureau company in India. | Experian was founded in 1996. It was the result of a merger between the CCN Group and TRW Information Systems & Services with popular GUS plc. |
| CIBIL has a vast consumer base of more than 1000 million commercial entities and individuals within its network. It collects valid information through its three divisions, namely Micro Finance Institution Bureau, Commercial Bureau, and Consumer Bureau. | Though Experian was formed in 1996, it got a license under the Credit Information Companies (Regulation) Act (CICRA) 2005 in 2010. Experian is incredibly popular for its latest analytical tools and marketing services. Owing to this reason, scores of commercial enterprises and individuals are able to make informed credit decisions. |
- CIBIL score has an edge over Experian score:
CIBIL scores are viewed by lenders as superior to Experian scores. This is rightfully so. Almost 90% of Indian financial institutions and banks have business tie-ups with CIBIL.
- CIBIL holds more weightage
Being an Indian-based establishment, CIBIL enjoys a greater weightage than Experian.
It is a common practice among lending institutions to make necessary checks on the CIBIL score right before checking your Experian score. After having a closer look at valid parameters, they settle down for the CIBIL score.
On account of this, it is very crucial to update and maintain good financial behavior. It will make sure that you grab the best deals on diverse credit products.
Also Read: Tips On Increasing Your Cibil Score By Using Your Credit Card
How To Fix The Scores?
- Keep your credit in good shape by doing simple things. Pay your bills on time, don’t use too much of your credit limit, and avoid applying for too many new credit cards. Even if your credit scores from different bureaus are different, these habits can make them better.
- Take a look at your credit reports from Experian and CIBIL to find any mistakes or errors in the information they show. Wrong details could make your credit scores go down.
- If you discover mistakes, you can reach out to Experian and CIBIL to challenge any information that seems wrong or is inaccurately recorded. Both bureaus have clear steps to look into and fix errors.
- It’s good to have different kinds of credit accounts, like credit cards, loans, and mortgages. This mix can make your credit scores better, according to both Experian and CIBIL.
Wrapping up
Both CIBIL and Experian play a decisive role in determining the credit behavior of individuals and commercial entities. They both use different parameters, yardsticks, and algorithms during calculating credit scores and preparing credit reports. Each company has legal validity which is why lenders and borrowers vouch for their credibility.