Important Things to Be Aware About CIBIL and Experian

Experian and CIBIL

People resort to availing of loans and credit cards to mitigate different financial requirements. For instance, loans allow you to purchase a home or car. Likewise, credit cards assist you in booking movie tickets or recent smartphones and others. Note that it is just one side of the coin. Another side of the coin is you just ought to have a sound credit report and credit score. These are dependent on different banks and other lending institutions to judge your financial soundness. 

Usually, credit reports get issued by the credit bureaus, CICs (credit information companies) authorized by RBI (Reserve Bank of India) under the Credit Information Companies Acts. Experian and CIBIL are highly popular credit bureaus. Credit bureau reports issued by them are used by financial institutions like NBFCs or banks as eligibility proof for credit cards or loans. 

What is meant by CIBIL?

CIBIL refers to an authorized company registered as per the Credit Information Companies Act. They are highly responsible for offering a CIBIL score, or credit rating, based on the credit history with distinct credit institutions as well as member banks. CIBIL enjoy the distinction of being one of the top-notch credit information bureaus.

Lenders endow massive importance on the CIBIL score. They consider your score while disbursing your credit card or loan. A good CIBIL score for home loan and other credit options are extremely important. This credit score is crucially a numeric summary, shedding light on the credit history and repayment behaviour. Typically, this number is a three-digit one. It ranges anywhere from 300 to 900. Your credit score shows your potential to repay the borrowed funds. A credit score ranging from 750 to 900 is looked upon as ideal.

CIBIL score consists of four parameters – 

  • Credit type & duration – 25 per cent
  • Credit exposure – 25 per cent
  • Payment history – 30 per cent
  • Other parameters – 20 per cent

What is meant by Experian?

Experian is one of the four credit information bureaus functional in India. They get credited for providing Experian CIR (credit information report). A report in question contains different detail like your credit cards, loans, credit payments etc. Distinct lending institutions and banks offer information about their consumer to the agency. It involves the consumer’s name, address, and other individual linked identification info like date of birth, PAN card, etc. 

Agency makes use of this info to record the credit details of the individual consumer. This contains a lot of details like loan date, type of borrowing, payment history, payment history, current balance, recorded defaults and much more. Whenever a lender like a bank makes any inquiry about a consumer, it offers a confirmation regarding matters such as kind request made, amount and others. 

Experian credit score plays a major role in deciding whether your credit card or loan request will get accepted. This credit score comes in the form of a numeric summary. This contains valuable details linked with your history surrounding previous or existing loans or credit cards based on your application. The game’s rule is easy – the higher your credit score, the better your chances of availing a credit card or loan sanctioned.

Currently, it is conducting its operations in India through 2 major entities – 

  • Experian credit information company of India private ltd.
  • Experian services India private ltd. 

Be thoroughly aware of the key distinctions between CIBIL and Experian –

Yes, both CIBIL and Experian scores are of the same importance. Nonetheless, there is the specific difference between them, such as – 

  • Score by CIBIL has the edge over Experian score – 

CIBIL score is considered superior to the score by Experian. Almost about 90 per cent of the financial institutions have business tie-up with CIBIL. 

  • Each follows a different proprietary algorithm to compute – 

Experian considers the FIFO algorithm for the computation of credit scores. CIBIL, on the contrary, used the Empirica model. 

  • CIBIL is provided high preference for its business credit report by the domestic money lenders –

Distinct leading banks and financial institutions endow preference to the CIBIL for distinct business loans. Note that CIBIL caters to domestic money lenders. Presently, it has 35 NBFCs and banks within its fold. 

On the contrary, Experian deals with massive international financial entities such as MBNA, Morgan Stanley, HSBC, Barclays, and Nationwide. 

  • CIBIL hold a great weightage

Given it is an Indian established, CIBIL enjoys a higher weightage than Experian. It is an extremely common practice amongst the leading institutions to make the required checks on CIBIL score right before reviewing your Experian score. Post having a closer review of the valid parameters, they usually settle for a CIBIL score. On account of this, it is necessary to update as well as maintain excellent financial behaviour. Doing so would ensure you grab the perfect deal on various credit products.

  •  Experian has a good past

Experian was started in the year 1996. It was an outcome of a pragmatic merger between TRW information systems and services and CCN group with GUS plc. 

CIBIL, on the other hand, was started in the year 2000. In its initial years, it was started by the RBI (Reserve Bank of India). Subsequently, it partnered well with the well-known Chicago-linked TransUnion International Inc. It made CIBIL one of the first credit bureaus in India.

  • Each varies in terms of its network and volumes of customers

CIBIL has a wide consumer base of over 1000 million commercial entities as well as individuals in its network. It accumulates valid info via its 3 divisions, namely Commercial Bureau, Micro Finance Institution Bureau, and Consumer Bureau. Although Experian was started in the year 1996, it got a license as per the credit information companies act (CICRA) in the year 2010. 

Experian is highly popular for its current analytical instruments and marketing services. Owing to these specific reasons, scores of individuals and commercial enterprises can make an informed credit decision.

Ending note

Both Experian and CIBIL play a crucial role in deciding your credit behaviour. They both use distinct parameters, algorithms and yardsticks when computing the credit scores and preparing the credit reports. Every company has a legal validity which is the reason why lenders and borrowers vouch for its creditworthiness.

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About the Author: John Vick

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