Credit Score and Credit Report: Are they different?

credit report

As an individual or a business owner who has borrowed from a formal lender or is using a credit card, you may have heard about your credit score and credit report.

In India, we tend to use the terms “bureau score”, “CIBIL score”, “credit score”, and “credit report” interchangeably. While the first three terms – bureau, CIBIL, and credit score – refer to the same thing, your credit report is slightly different.

What is a credit report?

The report is a collection of your credit history and historic financial behaviour and is indicative of your creditworthiness. Based on data submitted by various lending institutions across India, your report acts as a record of your credit history.

In India, four credit bureaus are licensed by the Reserve Bank of India (RBI) to produce credit scores for people and businesses based on their income and lines of credit. These bureaus analyse the risk associated with lending to you based on your ability to repay a loan. These agencies are:

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

Your credit report plays a key role in getting approval for business loans, as lenders assess the report before approving any loan business loan application.

Having a good credit report can facilitate your company to qualify for a great business credit card, loan, or term finance – all of which may help improve your income and accelerate growth.

Learn more about Company Credit Reports.

What is a credit score?

A credit score is a 3-figure value assigned to you or your business by the credit bureaus based on your financial history. Lenders use your credit score as an indicator of your creditworthiness when deciding to lend to you.

Your credit score can range from 300-900. Generally, a credit score of 750 and above is considered ideal.

A higher credit score makes you a favourable borrower for the lenders since your financial history indicates you repay your loans on time and spend your money responsibly. It can also help you negotiate better loan terms and conditions with your lender.

Your credit score is a part of your credit report. 

When you apply for a business loan with CreditEnable, we do a soft pull of your Experian credit score to check their business loan eligibility. A credit score soft pull has no impact on your credit as it is not a pull associated it any loan application. When we do this pull, you are also sent a free copy of your credit report to your registered email ID so you know your current credit standing.

Learn more about Experian. 

How is my credit score different from my credit report?

Your credit score is a 3-figure value and is a part of your credit report. It is assigned to you by the credit bureaus based on your financial history and data submitted by lending institutions in India.

Your credit report comprises of many different sections, including:

  1. Background details about you or your company, including the owner, directors, year of establishment, etc.
  2. Your credit score.
  3. Financial details, which give information about your company’s current financial position.
  4. Payment history of EMIs of previous loans you have borrowed.
  5. Previous searches include any requests for your credit report made by financial institutions in the past 24 months.

How is my credit score calculated?

All four credit bureaus licensed by the RBI have their own methods and algorithms to calculate an individual and company’s credit scores.

In general, your credit score is impacted by four factors:

1. Payment history: 
This determines how consistent you have been in repaying your bills and loan EMIs and suggests how responsible you are as a borrower. Displaying financially responsible credit behaviour makes you eligible for better loan terms and conditions, while delayed payments indicate to lenders that your cash inflows may be unstable.

2. Credit Utilisation Ratio:
This refers to the total amount of credit you use in proportion to the accumulative credit available to you. Your credit utilisation ratio is calculated by dividing your total outstanding balance by your total credit limit. Borrowers with high credit scores usually have a credit utilisation ratio between 30-40%.

3. Age of the Credit:
Your history with credit also impacts your credit score. Your track record of repaying your debt, as well as payments of any active lines of credit are considered. Having a long credit history gives lenders enough data about your credit behaviour to make an informed decision about lending to you. It is, therefore, advised to keep credit cards with a long history open even if you are no longer using them.

4. Total Accounts:
Your total accounts reflect your ability to handle different types of credit (secured and unsecured). It is important to maintain a good balance of the different types as a mix helps to boost your score.

If your credit score is above 750 and you require business financing, CreditEnable can help you get the right business loan for your growth needs.

Start your application today.

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