For a lot of us, credit scores and ratings are still relatively newer. Even when these concepts have been around for a while, still it’s important to understand them better. Nowadays, the number of people applying loans and credit is increasing. This is also impacting the level of awareness and consciousness of having a good credit score. It plays a huge role in determining your eligibility criteria for a loan/credit product.
Number of credit bureaus in India
Presently, we have 4 credit bureaus for all retail consumers in India. Launched in the year 2000, CIBIL is the oldest, while Experian, Equifax and CRIF High Mark came much later around 2010. The concept of CIBIL Score was introduced in the year 2007 and finally made available to consumers from 2011. Every bureau has its own credit score to assess a consumer on the basis of their financial information & creditworthiness.
Free credit reports
Do you know you can get 4 free credit reports in a particular year? In the year 2016, Reserve Bank of India commanded every credit bureau to provide one free credit score, every year. This gives us 4 free credit scores per calendar year to each consumer at that point of time.
Different credit score from different credit bureaus
It is believed that your credit score is uniform across all credit bureaus. However, that’s not really the truth. Each bureau has its own proprietary algorithm and scoring model, so the credit scores can be totally different from one another. So, it’s better to accept that two different credit bureaus can have different credit scores.
Here are the reasons why credit scores vary across credit bureaus:
Information sharing between lenders and bureaus
All credit bureaus get their information from banks and financial institutions. It’s not possible that some data will be provided to all bureaus at the same hour. All lenders follow their individual schedule of reporting credit information to the concerned bureau.
This can lead to one bureau having more unique data points or updated information compared to other bureaus. This can affect the overall credit score due to weightage given to that ranking factor.
Inconsistencies in reporting information to credit bureau
Credit scores differ across credit bureaus & can fluctuate between 50-100 point range. However, if you observe a very significant difference, higher than this range, it could be due to incorrect reporting or wrongly captured data. Ofcourse, these errors can be brought to the notice of the bureau as well as the financial institution so that they are verified and necessary action can be taken.
Another root cause for inconsistencies could be due to different contact information provided when applying for a loan or credit, commonly found with joint applications with parents, family or partner. This can cause fragmentation and inconsistency in the data points available across different bureaus.