Which Credit Score Do Banks Use?

Why is the credit score important?

Credit plays a critical role for consumers, buyers, and business ventures. Your credit score directly impacts your access to credit, as well as the speed at which credit offers may be accepted. A high credit score is crucial for securing loans or credit to purchase exclusive or customised products.

However, the significance of a credit score extends beyond merely obtaining credit. It can also help you secure better insurance rates and present a favourable impression to potential employers, showcasing financial responsibility. In short, maintaining a good credit score opens doors to multiple financial and personal benefits.

Why do banks use credit score?

Banks rely on credit scores as a key factor in their lending decisions. The following are some reasons why credit scores are essential for banks:

Risk assessment: Credit scores help banks gauge the risk involved in lending money to a borrower.

Loan terms: A credit score helps banks determine loan conditions such as the interest rate, tenure, and loan amount.

Creditworthiness: It offers insights into the borrower’s ability to repay the loan, indicating their overall creditworthiness.

Unsecured loans: Banks use credit scores to decide whether a borrower is eligible for an unsecured loan, which carries higher risk.

Fraud prevention: A good credit score reduces the chances of fraud, as it reflects a responsible credit history.

Which credit scores are popular in India?

In India, three main credit bureaus, in addition to Experian, provide credit scores that are widely used by banks and financial institutions. These are:

TransUnion CIBIL: One of India’s leading credit bureaus, TransUnion CIBIL has been operational since 2000 and maintains credit data for over 1,000 million individuals and businesses. With over 5,000 members, including banks, NBFCs, and financial institutions, their credit rating ranges between 300 and 900. A score above 700 is generally considered good.

Equifax: Functioning in India since 2010, Equifax is a global credit rating company with a presence in 24 countries. Their credit score ranges from 300 to 850, with a score of 670 or higher generally acceptable for most credit products.

CRIF High Mark: Founded in 2007 and approved by the RBI in 2010, CRIF High Mark serves over 10,500 banks and financial institutions. Their credit score ranges from 300 to 900, with scores above 700 considered to reflect good credit behaviour.

Maintaining a strong credit score with these bureaus is essential for gaining better access to credit products in India.