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Why credit score and credit report are two different things?

20-Jan-2017 written by : FSI-Team

The two most important financial indicators that are used today in the loan approval process are the credit score and the credit report. While both these metrics are used to gauge a person's credit worthiness, there is a big difference between the two.

While a credit report is a comprehensive document detailing a person's loan accounts, payment patterns and outstanding debts, a credit score is a numerical expression that is arrived after compiling all the facts in the credit report. In simple terms your credit report is like your school report card and the credit score is like the Grade point average that represents your financial behaviour by a numerical value. Let's understand this in more detail.

Credit report

A credit report contains an individual's credit and loan related information. The credit card companies, member banks and other lending entities send periodic details of each borrower to the credit bureaus. This data is compiled and formatted to make a detailed credit report for each borrower. It gives an overall picture of how a borrower is handling his debts over a considerable period of time. In India there are three credit bureaus –CIBIL, Equifax and Experian who are authorized to maintain all the credit related information. So if you have ever taken a loan then each of these bureaus will have a credit report outlining your loan repayment details. The details are recorded under different categories in the report.

  • Personal information including name, age, address and PAN number
  • Employment information like employer details, income
  • Accounts Information- Open and closed accounts, types of loans, repayment timelines, payment history, outstanding debts, credit limits, defaults on loans or bill payments, loan settlement
  • Credit inquiries made by various loan providers
  • Public records, collection items, bankruptcy, court judgements and others.

Hence a credit report is a complete record of your financial health and credit behaviour that is used by the lenders to assess your creditworthiness and the future ability to repay loans. You should check your report every year in order to make sure that the recorded information is correct. Any discrepancies should be reported immediately to the bureau. You can apply online and get a free credit report from each of the bureaus every year.

Credit Score

A credit score however is simply a number that signifies your credit worthiness. The credit bureaus calculate it on the basis of the information in your credit report. They use a complex mathematical model to arrive at this figure. Multiple factors that affect the credit score calculation are

  • History of repayment of loans and credit card bills.
  • Past record of late payments or defaults.
  • Number of credit accounts. Age of these accounts. Credit mix.
  • Amount owed as compared to the credit limit that is sanctioned.
  • Number of hard enquiries. Recent applications for credit.

A CIBIL score ranges from 300-900. When you apply for a loan, banks check your credit score to determine whether you are eligible for the loan. They usually set a benchmark to fairly evaluate the applications and approve loans only if the credit score of the applicant is more than a particular value. A credit score of 750 and above is considered to be a good score. There is a high chance that the application will get approved without any further credit analysis. A low cibil score signals risk of default and makes it difficult to obtain loans. If your score is below 600 your application may get out rightly rejected. If your score falls between 600 to 750 your credit profile will be scrutinized in detail to make a judgement about your creditworthiness.

Both the credit report and the credit score give a snapshot of your financial well-being. Loan approvals, interest rates offered and other credit related terms and conditions all depend on these indicators. If you plan to take out loans in the near future it is necessary that you monitor your credit score and report to avoid any unpleasant surprises during the approval process. Focus on building good credit habits. Borrow only the amount that you can afford and make your payments on time. These habits will help you build an impeccable credit profile and an excellent credit score.


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