Credit scores are an effective tool, primarily considered by lenders and other service providers to assess their customers’ financial behaviour. Usually, the top credit bureaus combine with different lending institutions and credit providers to assist them in making informed decisions regarding loan approval.
With the availability of various credit report agencies in India, most individuals have started to check CIBIL scores whenever they plan to apply for a loan. However, there is confusion about how credit scores differ across credit bureaus. Let’s explore the reason behind this.
Reasons for Varied Credit Scores across Credit Bureaus
Individuals who have checked their credit scores from various credit bureaus will understand that these scores vary across different bureaus. In the country, currently, there are four operational credit bureaus, and one can check credit score directly from these bureaus. Moreover, as per RBI’s stipulation, all the operational credit bureaus must provide at least 1 credit report every year for every individual without any cost.
Nonetheless, here are some of the reasons why your CIBIL score is not similar to other credit agencies:
- Algorithm and scoring model
Every credit bureau follows certain algorithms and methods for evaluating credit scores. For instance, suppose you have checked your credit score on CRISIL and Equifax. Here, the former follows an algorithm of decreasing 7 points on skipping EMIs, and the latter follows a reduction of 10 points on defaulting EMIs. Resultantly, your final CIBIL score will vary with different credit bureaus.
- Difference in information from lender to bureau
Often inappropriate information provided by the applicant leads to an evaluation of a wrong credit score. The mistake can include an incorrect name or contact number. Sometimes applicants have joint accounts with their family members. So, individuals feed their contact number when they check CIBIL score instead of providing the contact details of the primary applicant.
Resultantly, it creates a discrepancy in credit scores because the agencies will have the information of the primary applicant and not that of the secondary applicant.
- Discrepancy in date and time
Another significant factor for the difference in credit scores in different bureaus is the date and time. For example, if you are checking your CIBIL score on a gap of a month, week or day, then your score will differ from each other as it fluctuates every second. The reason behind such changes is the time difference in checking the score. This is because, in that time gap, the algorithm followed by the bureau may have updated, or the lender may have shared your repayment history.
Irrespective of the reason, if you are checking your CIBIL score within a certain time gap, then this score will be different in two credit bureaus.
- Time gap in providing information to the bureau
Financial institutions and lenders share your repayment history and debt managing sequence with credit bureaus; however, gaps in sharing details, maybe a week, month, or quarter, can lead to varying credit scores.
For instance, Equifax gets details from the lender based on months, and CRISIL receives information based on weeks, then, it is evident that if you are checking the score during the month, then Equifax will not have full information, whereas CRISIL will have the information. So resultantly, your credit score checked on one credit agency will vary when checked on another bureau.
- Associated phone numbers
There are many individuals who have two contact numbers, and both numbers are functional. So, if there is any discrepancy or mismatch of phone numbers that are registered with credit report agencies, it can also impact the credit score. For instance, suppose an individual has registered his/her dual numbers with TransUnion and Experian, then it is quite obvious that the former will convey information about the first number, and the latter will deliver information about the second number.
Resultantly, when one checks CIBIL score, it will differ from each other because TransUnion has evaluated the score based on the first mobile number, and Experian has calculated based on the second mobile number.
Apart from knowing these, individuals must also learn about the factors that are negatively impacting their scores and try to improve the same by adopting certain financial practices.
To conclude, in the above sections, you have seen how the score differs across credit bureaus based on certain factors. For example, it can be due to the difference in algorithm of credit bureau or differences in time gap or mobile number. But on the other hand, when you check CIBIL score, you will get a clear picture of your repayment history and debt management. So, if there is a significant difference of 5-10 points in the scores when you check it from different bureaus, it can be due to the above-mentioned reasons.