Equifax Credit Score vs CIBIL credit score
Equifax and CIBIL are among the four credit information companies that are authorized by the Reserve Bank of India to operate in India, the other two being Experian and High Mark. These companies collect and record all credit-related activities of customers and process the raw data to provide readable and user-friendly credit scores and credit information reports.
If you have applied for a loan or a credit card, you would know the importance of your credit score and history. But are there any differences in the credit scores provided by the various bureaus? What do you in case you have varying scores from two different bureaus? Here are some further details on the credit score services provided by Equifax and CIBIL.
About the two bureaus :
Equifax is a joint venture between Equifax Inc., USA and seven leading Indian financial institutions - State Bank of India, Bank of Baroda, Bank of India, Kotak Mahindra Prime Limited, Religare Finvest Limited, Sundaram Finance Limited and Union Bank of India. It was established in India in 2010 and is headquartered in Mumbai.
CIBIL was set up in India in 2000. The current shareholders include Trans Union International Inc. (an American credit services company), Aditya Birla Trustee Company, Bank of India, IIFL, UBI, IOB and India Alternatives Private Equity Fund. It has its headquarters in Mumbai.
Validity of the scores from the different credit bureaus :
The credit scores issued by all the bureaus are equally valid though some lenders might have their own preferences. However, the credit scores issue by Equifax and CIBIL and the other two companies all have the same validity. The CIBIL score might be more well-known because CIBIL has been in operation for a longer time and has many more years of historical data. The RBI requires all banks and lending institutions to report all credit-related customer transactions to all the bureaus, so there is no difference in the information currently received by any of the credit rating agencies for each individual customer.
Scoring range :
A credit score is typically a 3 digit number between 300 and 900. Both Equifax and CIBIL credit scores are in the same range. However, do keep in mind that there may be differences in the exact score between the two bureaus for the same customer, though it may not be significant. Each bureau will have its own weightage for different parameters leading to differences in the final score. Lenders too are aware of the scoring model of each of the bureaus and will factor these in when evaluating your credit score from each bureau.
If you notice a variation of more than 50 points in your credit score from the two credit scores, you can obtain a copy of your Credit information Report (CIR) and check the reports for any potential discrepancies. An error could occur when the lender is reporting the information, or when the bureau is recording the information, or when you provide personal details. Sometimes, an error can also be a sign of fraud or ID theft, so it is important to file a dispute with the concerned bureau immediately to get the error rectified.
Dispute resolution mechanism :
Both Equifax and CIBIL have a simple process for filing a dispute on your CIR or credit report. It can take 30-45 days for the error to be resolved and to show on your credit report.
You can download the Dispute Resolution Form from the Equifax website. You need to fill it in with the requisite details and authentication documents. You need to send the form and the documentation to the Equifax office at the address mentioned at the website.
You can file a dispute online at the CIBIL website. You can fill in the form with the necessary personal details required for authentication and submit it online.
Payment for buying your credit score or report
You can buy a copy of your credit report or your credit score from Equifax and CIBIL and both bureaus charge a payment for the service. CIBIL charges Rs 159 for a CIR and Rs 550 for a credit score. Equifax charges Rs 138 for a CIR and Rs 400 for a credit score. You will also need to send the requisite ID documents for verification.
The payment for both bureaus needs to be made by DD.
What is a good credit score?
In general, a score of 750 or above is seen as a good score. Nearly 80% of all loans that are sanctioned are to customers holding a credit score of 750 or above. If you have a high score, you stand a good chance of being approved for a loan, and the loan approval process will be quicker, smoother and easier.
A low score (less than 650) indicates a high-risk customer with a high probability of defaulting on debt obligations. Banks, credit card companies and other lenders would be reluctant to approve credit to individuals with a low score as they are nervous about the potential for repeated defaults on payments.
Why is a credit score important?
A credit score is a quick indicator if an individual has a good record of repaying their debt obligations. Lenders use your credit score to evaluate if you qualify for a loan and if so, to determine the terms and conditions of the loan including the interest rate, loan amount and tenure.
When applying for a loan or credit card, the first thing lenders do is to check your credit score and credit report to see if you qualify for new credit. If you fulfill this basic criteria of creditworthiness, then your score is also used to determine what type of loan you are eligible for and what interest rates you will be charged. The higher your score, the better the interest rate you will be offered as the lender is reassured that you will repay your loan obligations.
Having a low credit score, however, is not the end of the world. It may still be possible for lenders to give you a loan, provided your score is not abysmal. Keep in mind, however, that you may be subject to much harsher terms and conditions on your loan or credit card.
In conclusion, while building a credit history is important, it is equally importatnt to maintain a healthy credit score. The credit scores provided by an Equifax or CIBIL are used by banks and other lenders to evaluate if you are loan-eligible.