Why do different credit bureaus have different credit scores?

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Talk about personal finance, loans or credit cards, and you will hear the term ‘credit score’ or ‘CIBIL score’. Credit Score is the gold standard metric these days, which banks and various financial institutions employ to assess an individual’s creditworthiness. 

It is an essential qualifier to apply for a loan or credit card with banks, NBFCs and even new fintech lenders.

Any lender is happy to acquire a borrower with a good credit score in its loan portfolio. 

A borrower with a good credit score may 

  • get a loan processed faster due to good credibility
  • maybe able to negotiate better rates on the loan
  • will always be a welcome customer for the bank in future for other offerings

Therefore, any borrower should strive to build a good credit history from Day One of their financial innings.

There are different credit bureaus in India: CIBIL, Equifax, Experian and CRIF Highmark. CIBIL Score is the most popular credit score used widely by banks & institutions. (To check your CIBIL score, click here). The credit agencies receive data from various banking and financial ecosystem entities. This data is consolidated and analysed to arrive at an aggregate credit score. The credit score ranges from 300 to 900 across all credit bureaus. You can check your credit score online with different credit agencies.

For an individual, since the data is constant across all bureaus, the credit score should be the same, one may conclude. But, you may discover to your surprise that your credit score differs slightly across different credit agencies.

Let us look at the reasons as to why there is a difference:

Method of Calculation

Different credit bureaus use their specific algorithms to calculate credit scores, and these algorithms are updated from time to time. The bureaus that have updated algorithms may show different scores than those with older versions. 

Varying Parameters & Weightage

There could be a variance in weightage assigned to particular parameters while arriving at final credit scores. For example: late payment by a few days on a credit card bill may be penalised by a different factor by one agency, while another may look at it as a fraction of total credit limit, frequency of late payment and may levy a lighter penalty in credit score. 

Time Lag in sharing information

Credit score calculations are based on data received from various banks and financial entities. At times, there is a time difference in sharing of data with different bureaus. The schedule for data sharing may differ for various lenders; one bureau may have current data for calculation at a particular time, hence inconsistencies in scores. Due to the slight difference in data sets, the score may differ across bureaus at a specific time.

Mismatched Personal Details

A user may have different phone numbers and email IDs recorded with varying credit agencies. One agency may be capturing data for one number registered. In contrast, another may be fetching data for a different contact number; hence the calculation and credit scores may differ. In the case of joint loans, at times, the contact details of the joint holder may be captured as for the primary applicant, thus altering the score.

The slight difference in credit score across agencies does not matter. Irrespective of the bureau, as a borrower, it is pertinent to be vigilant and consistent with your loan or card repayments. A clear repayment record on a credit card or a two-wheeler loan today will pave the way for good credit history and ease in applying for a big-ticket loan, e.g. home loan, in future.