Will your credit score differ from one credit bureau to another?
Premium- Credit scores from two credit bureaus can be different, and generally, a marginal difference of 50-60 points in credit scores from two different bureaus is common
Credit scores have gained importance in the last couple of years, and lenders have now started offering lower rates to borrowers with higher scores. It is, therefore, important for consumers to track their credit score regularly.
At present, there are four credit information companies (CICs) or credit bureaus in the country: TransUnion CIBIL, Experian, Equifax, and CRIF Highmark. Each of them maintains the credit histories of retail borrowers and generate a credit score between 300 and 900 based on it.
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1 min read . 01:07 PM ISTWhen calculating scores, credit bureaus consider factors like repayment history, type of credit, age of credit, credit exposure, and credit inquiries. They share the credit history and scores as the Credit Information Report.
"The broad principles that go behind the generation of credit score would be similar across bureaus. However, each bureau will have their variables and computation logic that they have developed basis their analytics insights. Consequently, credit scores from two credit bureaus can be different, and generally, a marginal difference of 50-60 points in credit scores from two different bureaus is common," said Navaneetha Krishnan, chief – credit policy and process transformation, Bankbazaar.com
Lenders are free to use any bureau depending upon the service, the quality of data they receive, the price, and their perception of which credit bureau has a better scoring methodology.
"Lenders, typically, test the efficacy of the different bureau scores on their historical data across their product portfolio and formulate their bureau strategy based on all the above factors for their different products," said Krishnan.
According to him, it doesn't matter which bureau consumers choose to keep track of their scores. "A consumer is entitled to four free credit scores from every bureau every year. A consumer should use this facility to track their credit score and the accuracy of the credit history," said Krishnan.
Moreover, RBI mandates all lending institutions to share data on all existing loans and credit cards with each credit bureau at least once every month. Regardless of the methodology, credit bureaus will use the same data to give a score to a borrower.
Between the credit score and credit history, you will get an accurate picture of the health of your finances no matter which credit bureau you use.
(Do you have personal finance queries? Send them to mintmoney@livemint.com and get them answered by industry experts)
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