The quick loan has helped many people meet their financial needs with ease. A sturdy credit system is not only helpful for the citizens but also boosts economic transactions and helps a country’s economy grow. But a proper approach to validating candidate profiles is important to facilitate safe lending and borrowing practices. Credit information companies (CICs), which the Reserve Bank of India authorizes under the Credit Information Companies (Regulation) Act, 2005, typically issue credit reports. Experian and CIBIL are the most well-known companies. Financial institutions, including the best loan apps, use the bureau reports to check a person’s eligibility for loans or credit cards.
These credit bureaus review your payment history, maintain your credit record, and provide all information related to your borrowing practices. The bureau assigns a credit score to every individual based on their borrowing behavior, repayment record, ongoing debts, credit card usage, and financial stability. Lending institutes rely on this score to assess the risk associated with your profile. This helps them make a sound lending decisions.
Read more about your credit scores before applying for a quick loan through the best loan app.
What is a Credit Score?
One of the most crucial considerations you must make when applying for a personal loan is your credit score. Although several factors influence a personal loan’s interest rate, the credit score has the most significant impact.
You should be aware that quick loan applications impact your credit score as traditional loans. No matter where the loan originated, your credit score will suffer if you cannot pay it back. Furthermore, regardless of the source, you will not be approved for a loan if you have a low credit score.
However, the best loan app does offer one significant advantage that subtly influences your credit score. You can access the information whenever you want to comprehend your current financial situation when you apply for a loan online or through an app. In addition, you can use the app to accurately determine all loan-related factors to ensure the best loan plan.
What is CIBIL Score?
Based on a person’s credit history with various credit institutions and member banks, CIBIL provides a credit score. CIBIL is India’s oldest credit information bureau and one of the most trusted credit bureaus.
When authorizing a loan or a credit card, lenders consider this score. This score provides detailed information about a person’s credit history and repayment practices. It ranges from 300 to 900. Typically, this number has three digits. Based on this score, the lender can judge your ability to repay the borrowed money.
What is Experian Score?
Experian is one of India’s four top credit reporting agencies. It is a pioneer in several information services and has a stellar reputation worldwide. Experian offers an in-depth analysis to customers and banks through company credit scores, assisting them in making decisions.
Experian provides robust business tools like Market Switch and Powercurve Origination and the company credit score to aid in additional analysis. In terms of commercial credit scores, Experian has a strong reputation.
The company has built a solid reputation with 125 years of experience in data collection, analysis, processing, and deployment for businesses to give financial control and access to financial services.
Is Experian Credit Score the Same As Cibil Credit Score?
No, both Experian and CIBIL scores are of equal importance. However, there are some distinctions between them:
- Lenders consider CIBIL scores superior to Experian scores, giving them the upper hand. Most banks and financial organizations in India believe in the CIBIL score.
- CIBIL and Experian use a unique, proprietary formula to compute. Experian uses the FIFO algorithm to determine credit scores. It refers to the employed mechanism as FICO or FICO II. On the other hand, CIBIL makes use of the Empirica model.
- Domestic money lenders choose CIBIL for their business credit reports. For various company loans, different top banks and financial institutions favor CIBIL. Most of CIBIL’s clients are domestic money lenders. Presently, it includes 35 banks and NBFCs. On the other side, Experian does business with many global financial institutions, including Morgan Stanley, MBNA, Barclays, HSBC, and Nationwide.
- Because CIBIL is the oldest Indian credit bureau, it is given more weight than Experian. Lending institutions routinely check your CIBIL score before examining your Experian score to make any necessary adjustments. They focus on the CIBIL score after looking deeper at the acceptable conditions.
- Both CIBIL and Experian have different networks and consumer volumes. More than 1000 million businesses and individuals are CIBIL’s network’s large consumer base. It gathers reliable data through its three divisions—the Micro Finance Institution Bureau, the Commercial Bureau, and the Consumer Bureau. Experian was established in 1996, but it wasn’t until 2010 that the company was granted a license under the Credit Information Companies (Regulation) Act (CICRA) 2005.
Experian and CIBIL both significantly impact your eligibility to avail of finance. They employ distinct formulas, criteria, and algorithms when determining credit scores and creating credit reports.
If you need a quick loan during an emergency, the bank only provides you with the money based on your credit score. The higher your score, the greater your chances of having your loan application granted. Your credit score also influences your interest rates and the total loan amount you can borrow. Thus, checking your credit score every three months and checking with all four important credit bureaus is very important.
If you spot any discrepancy in your credit record, report it to the bureau immediately. Also, if your credit score is low, take the necessary steps to improve your score. It might take 3 to 6 months for the changes to reflect in your credit report. But financing might be an emergency need, so you must always maintain a healthy score.