CIBIL Score or Experian Score: What to Consider Before Applying for Loan

Financial institutions look up an applicant’s credit information from a Credit Information Company (CIC) or credit bureau when they apply for a loan. With this, they can assess whether the potential borrower is eligible to apply for a loan.

In India, there are four types of credit bureaus, namely;

  1. CIBIL
  2. Equifax
  3. Experian
  4. Highmark

However, this article will only cover CIBIL and Experian scores.

What is a CIBIL score?

CIBIL or Trans Union CIBIL is the oldest and most recognised credit bureau in India. It collects and maintains credit information related to millions of individuals and institutions.

CIBIL is considered the most reliable place to determine a borrower’s creditworthiness, and most financial institutions, including Poonawalla Fincorp, consider CIBIL scores in order to check eligibility. In case an applicant meets all eligibility criteria, they can apply for low interest Personal Loans without collateral. 

PointersCIBIL
Establishment year2000
Credit report and credit score cost₹550/-
Scoring system300-900, where 900 is the flawless credit score
Duration for report generation7 days

What is an Experian Credit Score?

It helps financial institutions make decisions about loan approvals. The Experian credit report and scores show an individual and company credit record.

Also, Experian provides tools like information, marketing services, and analytics for commercial enterprises and individuals to make informed decisions.

ParameterExperian
Establishment year2006, the license granted in 2010
Credit report and credit score cost₹399 including taxes (Credit report + Credit score)
Scoring system300-900, where 900 is the flawless credit score
Duration for report generation20 days

Similarities Between CIBIL and Experian Scores

Both the CIBIL and Experian score range between 300-900. If your score is above 700 and 750, you are eligible to apply for loan. Also, you’ll get attractive interest rates from the loan provider for a CIBIL score above 750.

CIBIL or Experian Scores? Which one to consider while getting Personal Loans?

In India, there are secured and unsecured loans. People tend to prefer unsecured loans due to low and fixed interest rates. But to get a low interest rate on your loan, you need a credit score of 750 or more.

On the other hand, secured loans don’t require a credit score. However, if you maintain a healthy credit score, you get attractive low-interest rates for the secured loan. Some categories under secured loans are – home loans, Loan Against Property, and Mortgage Loans.

But if you consider which credit report gains more weightage, it is the CIBIL score; most non-banking financial companies (NBFCs) in India look out for CIBIL scores to assess whether you’re eligible for the loan, even before looking at the Experian scores.

So, you must update your credit score to get through the selection process for a Personal Loan. Also, both credit bureaus don’t undergo the same calculation strategies. CIBIL is calculated through the Empirical method, and Experian is calculated through FIFO Algorithm.

Overall, both are well respected by many institutions. However, the CIBIL score slightly takes the upper hand.

Tips for New Borrowers on How and when to Use Credit

You might find this a daunting process if you’re new to credit and borrowing. However, this is for your good as banks tend to get your overall financial status and background to assess whether you’re fit to borrow and repay the loan on time. So, you must follow the rules so that it won’t be more challenging when you apply for loans later.

Here’s How You Become a Disciplined Borrower

  • Avoid borrowing loans as much as possible.
  • Have a credit card to build a healthy credit history and take loans to get lower interest rates.
  • Avoid traps that lead you to debts in the initial phase of your career because your loan repayment should be 40% of the salary you bring home.

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