Do you notice a difference in your credit scores among CIBIL, Experian, Equifax, and CRIF High Mark bureaus? Have you ever wondered why these scores vary significantly, sometimes? This perplexing situation arises due to a multitude of factors that contribute to the distinct scores across these bureaus.
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The credit score, a numerical value ranging from 300 to 900 points, is determined by a credit bureau’s algorithm. India has four prominent credit bureaux—TransUnion CIBIL, Experian, Equifax, and CRIF High Mark. These bureaux provide insights into financial behaviour, aiding financial institutions in making informed credit-related decisions. However, beneath the surface, these bureaux possess unique attributes that set them apart from one another.
So, why do these scores diverge despite a shared credit history? The answer lies in the proprietary scoring models employed by each credit bureau. These algorithms intricately calculate credit scores by considering various factors, including payment history and account utilisation. However, due to the diversity in these models, certain factors might be assigned different weights or additional variables could be integrated, ultimately leading to score disparities.
Beyond scoring models, another contributing factor is the variance in data. Each credit bureau may not possess identical information about your credit history. Discrepancies or delays in data reporting can stem from a myriad of reasons. For instance, a lender might report data to one bureau but not to others, creating disparities in credit histories and subsequently affecting the calculated scores. Furthermore, differences in the frequency of data updates among bureaus can lead to discrepancies if one bureau’s information is more up-to-date than another’s.
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Adhil Shetty, CEO of BankBazaar.com, elaborates, “Each credit bureau uses its own proprietary scoring model to calculate credit scores. Since the models can differ, they may weigh certain factors differently or consider additional variables, leading to score variations. The other factor is the difference in data. All three credit bureaus may not have the same information about your credit history. Sometimes, there may be discrepancies or delays in the data reporting process. For instance, if a lender reports data to one bureau but not to others, it can lead to differences in the credit histories and subsequently in the calculated scores. The frequency of data updates can vary between bureaus. At times, the credit information may be not updated in real-time, which can lead to score differences if one bureau has more recent information than another.”
It’s crucial to recognize that each lender establishes its own criteria for determining whether a credit score meets their standards. Consequently, the same score from two different bureaus might be evaluated disparately by lenders.
Shetty said: “While the score ranges provide a general idea, the exact interpretation of scores can vary depending on the credit bureau and the lender. Lenders have their own criteria for considering a credit score as acceptable or not. So, they may treat the same score from two different bureaus differently.
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Instead of fixating on a specific number, focus on trends and overall credit behaviour. Maintaining a solid credit profile by responsibly managing your credit holds more importance than the precise numerical value of your credit score.”
