Experian Vs CIBIL : Definition, Meaning & Differences

Experian Vs CIBIL

Introduction to Experian and CIBIL

Credit score is an important 3-digit number that determines an individual’s creditworthiness, indicating their capability to repay borrowed funds. These scores are decided by credit bureaus based on an individual’s repayment history, payment behaviour, and many other factors. Lenders use this credit scores to assess the risk associated with lending money to an individual. Experian and Credit Information Bureau (India) Limited (CIBIL) are the two important credit bureaus that play a vital role in the financial industry showing credit reports to individuals and businesses.  In this article, we will understand more about the difference between cibil and experian:

What is Experian?

Experian is a multinational credit reporting agency that gathers and analyses data from various sources across the globe. This is what helps lenders make informed decisions before lending money to any borrower. These credit reports contain detailed information about an individual’s credit history, including their payment history, outstanding debts, credit utilisation, etc. This is widely used by lenders to assess the creditworthiness of borrowers and determine the chances of defaults.

What is CIBIL?

Credit Information Bureau (India) Limited, or CIBIL, is the first credit information company in India. It collects credit information from financial institutions and tracks credit reports and scores for both people and businesses. With the help of CIBIL, lenders can make an informed credit decision. The CIBIL credit reports contain detailed information about an individual’s or business’s credit history, including payment patterns, debt-to-credit ratios, credit utilisation, and more.

CIBIL vs Experian

Let’s understand why Experian and CIBIL scores are different. Few points on difference between CIBIL and Experian occur are:
Point of difference Experian CIBIL
Data Experian uses data from various sources globally. CIBIL collects data majorly from banks and financial institutions.
Scoring Models Experian uses the FICO model for scoring CIBIL’s model is more specific to the Indian financial market.
Market Presence Experian is widely used in multiple countries CIBIL is widely used in India
Range Experian specifies a range of 300-850. A credit score of 700 and above is considered good CIBIL specifies the same at 300-900. A score above 700 is considered good

Factors Affecting Experian and CIBIL Scores

Payment History: Payment history is one of the important factors that affect credit scores. It shows your track record and reflects your past payments. Late payments or defaults on your past payments can impact your credit score. You will eventually find it difficult to get credit.  Credit Utilisation:  Credit utilisation refers to the amount of credit you are using to the total amount of credit available to you. It’s a ratio of your credit limit that you’re using at any given time. 30% is a widely recommended credit utilisation rate.  Length of Credit History: This refers to how long you have been using credit. It is important to determine your credit score. The longer credit history is generally seen as a positive indicator of financial responsibility. It demonstrates the ability of an individual to manage credit well over a longer period. Credit Mix: Credit mix refers to the various types of credit accounts you have in your financial portfolio. Lenders consider the different types of credit you manage, such as credit cards, mortgages, secured and unsecured personal loans, etc. to assess your credit record. It is important to diversify your credit record, however, managing credit accounts responsibly and avoiding opening unnecessary accounts will keep your portfolio positive and diversified. Recent Credit Activity: When you open new credit accounts within a certain period which is closely assessed by lenders and credit scoring models is called recent credit activity. When you apply for new credit, whether it’s a credit card, the lender typically takes a close look at your credit report. However, multiple inquiries within a short period can negatively impact your portfolio.

 Importance of Experian and CIBIL Scores

Experian and CIBIL scores are crucial as they reflect an individual’s creditworthiness and financial responsibility. Lenders use these scores to evaluate loan applications, determine interest rates, and set credit limits. Maintaining a good credit score is essential for accessing credit on favourable terms and achieving financial goals. These scores provide lenders with details about their credit history and repayment behaviour, making lenders an informed decision.  A good credit score indicates a history of responsible borrowing and timely repayments. Moreover, maintaining a positive credit history can benefit you in the long run, as it contributes to building a solid financial reputation. By consistently monitoring and managing their Experian and CIBIL scores, individuals can take proactive steps to improve their creditworthiness leading to financial success.

Conclusion

Experian or CIBIL scores are important to an individual. Understanding the differences between CIBIL and Experian and the factors affecting credit scores is essential for managing personal finances effectively. Regularly monitoring and improving credit scores can eventually lead to financial opportunities. You will have several lender options if your credit score is good, and you repay personal loans on time. Moreover, a thorough understanding of Experian and CIBIL enables lenders to make informed decisions while giving loans. Also Read: How to Get a Perfect 900 Credit/CIBIL Score?

Frequently Asked Questions

What Is The Meaning Of Experian?

Experian is a multinational data analytics and credit reporting company that provides data across the globe which provides reports and credit scores to individuals and businesses.

What Is The Meaning Of Cibil?

CIBIL (Credit Information Bureau India Limited) is a credit information Indian company licensed by RBI that provides data reports and credit scores to individuals and businesses.

What Is A Good Credit Score?

The credit scores between a scale of 300 to 900 in India and a credit score between 660 to 724 are considered good. However, the best practice is to maintain a credit score of above 750.

How Does Experian Calculate Credit Scores Compared To Cibil?

Experian collects information and data from various sources which mainly includes banks and financial institutions across the globe. CIBIL’s model focuses more on the Indian financial market. CIBIL collects credit information from Indian lending institutions and financial entities.

Which Credit Bureau Is More Widely Used In India, Experian Or Cibil?

CIBIL is the credit bureau that is most widely used in India.

How do lenders interpret Experian or CIBIL scores when assessing creditworthiness?
A higher credit score concludes a better credit history, and a low score indicates more chances of defaults on an individual’s side. Hence, lenders can lend money to the borrowers based on the borrower’s credit score.

Can I Have Different Scores From Experian And Cibil?

Both Experian and CIBIL use different parameters, methods, and algorithms to determine scores and prepare credit scores.

How Often Are Experian And Cibil Scores Updated?

Experian and CIBIL scores usually get updated every month

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