Varying scores from different credit bureaus? Don't worry too much
There are four Reserve Bank of India approved credit bureaus in India. All the bureaus have developed their proprietary consumer credit scores. That means one can have different credit scores from each of these credit bureaus. So, how do you keep track of them all and what should you do if your scores differ between these four credit bureaus?
Same credit range
All four credit bureaus in India follow RBI prescribed score range of 300 to 900. Any score above 700 is considered a good score with 900 being the best, across four credit bureaus.It is normal to have slightly varying credit scores across different bureaus. The four credit bureaus collect, collate and aggregate similar data from lenders on a regular basis. However, the way each of these credit bureaus understand the data and calculate credit scores differs. We lay down a few of the key reasons for such differences:
All Credit Information Companies (CICs) have been developing credit scoring algorithms for many years, across many countries. Each of these companies has developed a proprietary set of techniques and methodologies to process credit data and calculate credit scores. Even though, most credit scores broadly revolve around five creditworthiness indicators such as payment history, amounts owed, length of credit accounts, credit mix, and new credit, the way each credit bureau calculates underlying variables and assigns different weights to these parameters and variables results in variations in the credit score.
For instance, if you are paying your Equated Monthly Installments (EMIs) in a timely manner for the last three years, but have delayed payments for the last two months, then with Bureau-A, you might still be scoring higher because this bureau might give higher weightage to your history of timely loan payment spread over thee years and comparatively lower weightage to a few recent delays. However, the same might not be the case with Bureau-B, which might penalise your credit score by a few points as it assigns higher weightage to your most recent behavior.
Duration of calculating scores
Generally, for a definitive calculation of a credit score, most credit bureaus look at the history of past 36-48 months. Also, most credit bureaus require a credit history to be available for at least past three to six months. This could vary between different credit bureaus. Bureau A may provide a credit score to a new credit card customer with just three months of repayment history, whereas Bureau-B may not provide any credit score for such customer.
Nature of underlying data itself
The credit score is calculated as per the availability of updated data within the database of the credit bureau. Even though lenders send the same data to all credit bureaus at the same time, the way and the speed at which the data is processed varies across the credit bureaus.
The variation in score can also happen because one credit bureau may have more information on your credit history than others, simply because it came into existence earlier than other credit bureaus and hence can capture old data. This old data could either hurt your score or work in your favor. Lenders generally prefer credit scores to reflect your recent history from past three to five years.
Do I need to be concerned?
You need not constantly monitoring your scores across all bureaus. The credit scoring models across all four credit bureaus are basically founded on the same principle of maintaining credit discipline. So, if you don't miss payments, keep your credit utilisation ratio low and don't go wild opening new credit card accounts when you don't need them, you should be able to maintain a high score with other bureaus as well with minor variations.
Lenders are trained by credit bureaus to understand the technical differences in the credit scores provided by them without any harm to your interest. Lenders understand that 750 in Bureau A may be equivalent of 720 in Bureau B.
If the variation in your credit score is beyond 70-80 points and is a concern to you, it's best to refer to the data points the bureaus have captured in your credit reports and compare them. Review your credit reports minutely for any errors or significant mismatches.
In case of any discrepancies, you should intimate the bank and the credit bureau immediately. Every credit bureau has the provision for resolving disputes in the credit report. All you need to do is to send an email to the respective credit bureau highlighting the errors along with the relevant supporting documents. The bureau will then coordinate with the bank to work on the request and get the errors rectified in the credit report.
It is a good idea to check your credit scores and reports once a year with any of the four approved credit bureaus.
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