Common Myths about CIBIL Score

The term ‘CIBIL Score’ has been here for a while now, but still people aren’t clear about its concept. Due to that, myths around CIBIL or credit score keep spreading. However, as long as you don’t believe in those myths, it’s fine. But, the moment you start believing them, a problem arise.

Since CIBIL or credit scores are easily misunderstood, here in this article we have curated a list of common myths revolving around CIBIL score and a reality check on them. 

Myth 1: Checking credit report regularly can impact your score

That isn’t true. You can check your credit report without feeling worried about your credit score being affected. If several lenders enquire about your credit details in a short span of time, it may lower your score by a few points. It is always recommended to check your credit score at regular intervals. That way you can identify the areas of improvement thereby increasing your credit or CIBIL score. 

Myth 2: Your income is a contributing factor to your credit score

Your credit score is determined on the basis of your credit report. And your credit report has no traces of your income. You could be earning in lakhs annually, but if your behavior isn’t creditworthy enough, your credit score will lag behind. 

Myth 3: Poor CIBIL score means no loan

Your CIBIL score is not the sole determinant for evaluating your loan application. There are several other factors that play an important role in credit decisions such as- an individual’s income, their reputation, co-applicant credit score, etc. 

If your loan application is rejected by one particular lender, there are various other options. However, due to a poor credit score, you may have to bear high interest rates. 

Myth 4: Having a debit card is good for your credit score

A debit card is only a tool to access your savings account and hence has nothing to do with your credit history or score. In order to build a CIBIL or credit score, you must get yourself a credit card or a loan. Do not expect your credit scores to be soaring high as soon as you get a credit card. It may take a few months to build a score. 

Myth 5: Closing old accounts can boost your credit score

Many people end up closing their older credit accounts, as they feel that having multiple credit cards can affect their credit scores. That’s a common misconception. Closing an old credit card account will lead to shortening of your credit history. When you have a long credit history, lenders will get a better idea of your credit behavior. 

Myth 6: Your marital status affects your credit score

No matter married or unmarried, your credit score remains unchanged. Remember, CIBIL or credit scores are majorly dependent on a person’s financial behavior and it has no connection with your marital status. 

Myth 7: Anyone can check my CIBIL score

This yet another common error involved in understanding the credit score. Not everyone is authorized to check your credit score. It is either you or registered financiers have the right to check your CIBIL, that too after taking consent of the borrower. 

Myth 8: Applying for new credit is bad for your credit score

Applying for new credit isn’t bad for your credit score. However, if you apply for multiple credits at every available lender within a short span of time, that may lower your credit or CIBIL score. That’s because, when you apply at multiple banks, each lenders subjects a hard pull on your credit report, which leads to a poor credit score. 

Myth 9: A good CIBIL score stands for a loan with lower interest rates

When it comes to a loan application, the lender will take various factors into consideration such as the borrower’s income, their age, past credit history and not just your CIBIL score. If the lender isn’t satisfied with your overall credit behavior, he may either reject your application or offer higher interest rates. 

Myth 10: Clearing off debt will remove the transaction from your credit report

Do not assume that paying off debt will entirely remove the transaction from your credit history. Rather, it will remain on your credit report for years and impact your CIBIL or credit score. Please note that negative information can stay on your report for up to 7 years, whereas bankruptcy information can remain for a whopping 10 years. 

Myth 11: Zero credit is the real deal

Not really. When it comes to your credit card or loan applications, lenders judge the borrower on the basis of their credit history. Therefore, having no credit history at all is no way ideal.

 So, what helps in boosting your credit score?

• Pay your bills on time and in full.
• Monitor your credit score regularly.
• If you come across any errors in your credit report, raise a dispute.
• Avoid applying for multiple credit cards all at once. 
• Don’t close your credit account without thorough analysis.