For many Indians, credit scores and credit reports are still a relatively new concept, even though they’ve been around for over a decade. As the number of individuals applying for loans and credit cards has increased, so has the awareness of a credit score and its importance in determining eligibility criteria for a credit product.
Credit bureaus in India
There are 4 credit bureaus in India. Set up around 2000, CIBIL is the oldest, with Experian, Equifax and CRIF High Mark receiving their licences around 2010. The CIBIL Score was established in 2007 and made available to consumers from 2011. Each bureau will have their own credit score for a consumer for the same data and financial information.
Free credit reports
Did you know you can get 4 free credit reports in a calendar year? Back in September 2016, the RBI had mandated that each credit bureau has to provide one FREE credit report per calendar year to each consumer per calendar year- which means you can get four free credit reports in a calendar year along with your credit score at that time.
Best credit score
So, which credit score is the best?
There is no straightforward answer here. While all these four credit bureaus provide a credit score in the 300-900 range, each of them has their own proprietary algorithm and scoring model. This would lead to varying credit scores even though overall weightage for various factors would broadly be the same.
This means you can have four different credit scores from four credit bureaus, and all these four credit scores would be valid.
Which credit score should you follow?
Again, there is no single answer. A credit score is a measure of the risk factor involved in lending to you - in other words, your creditworthiness. Typically, if you have a good score in one bureau, it is quite likely to be good in other bureaus as well, so you can choose to follow a credit score from any bureau.
Lenders also have varying criteria to disburse loans to borrowers, or for approving credit card applications, and each lender may refer to a credit score from any of these credit bureaus. For eg, if you are applying for a credit card from a bank, they may fetch your CIBIL credit score and credit report. If you are applying for a loan from an app, they may fetch your Experian credit score and credit report.
In the OneScore app, your credit score and free credit report is currently fetched from Experian credit bureau every month, and in case you notice a discrepancy, you can report the issue to Experian directly from the app itself by tapping on “See an error?”
Information sharing between lenders and bureaus
Information to the credit bureaus is provided by banks and financial institutions, and there is a possibility that some information may not be provided to all bureaus at the same time. Lenders also have their own schedule of reporting credit information to each bureau.
This can result in one bureau having more unique or up-to-date information than the others, affecting the overall credit score due to the weightage given to that factor.
Inconsistencies in reporting
Credit scores across credit bureaus can vary in the 50-100 point range, so if you notice a very significant difference higher than this, it could be due to an incorrectly reported or wrongly captured data point. Such errors can be brought to the notice of the bureau as well as the financial institution so they can verify and make the necessary corrections.
Some other reasons for inconsistencies could be due to different contact information when applying for a loan or credit card, such as your mobile number or email id. This can cause fragmentation and inconsistency in the data points available across different bureaus.
To recap, these are the common reasons why your credit score varies across credit bureaus:
1. Scores with bureaus are from different dates or time periods
2. Scores are calculated by using different algorithms and models
3. Lenders may report information to the bureau differently across time intervals
4. All bureaus may not have information linked to a particular email id or phone number