By Viral Bhatt
CIBIL Score needs to be debunked Myths You Shouldn’t Believe
Viral Bhatt, Founder at Money Mantra in in conversation with Prittle Prattle News.
CIBIL Score Myths Debunked
CIBIL Score is a three-digit numeric review of your credit behavior; generated by TransUnion CIBIL based on your financial transactions, i.e., EMI payments, credit card usage, loan accounts, and credit inquires. The Score ranges are 300 to 900, with 300 being the highest and 900 the most senior. However, several misconceptions surround the CIBIL Score, which needs to be debunked, as lack of awareness will help you make uninformed financial decisions. Read this article to know about all the CIBIL myths you shouldn’t believe.
Myth 1: Your monthly income impacts your CIBIL Score
Fact: Your monthly income affects the loan amount and interest you are eligible to get and not your CIBIL score. The score influenced by the number of credit accounts you maintain and the balance you own in the same.
Myth 2: CIBIL rejected my loan application
Fact: Your loan application is denied due to a low CIBIL score and not by the CIBIL Bureau. Credit bureaus are not involved in making lending decisions, as lending institutions are entitled to do the same. The bureau is responsible for generating a credit report based on the information provided by the banks and other financial institutions. Hence, the loan is not rejected by the CIBIL bureau but due to a low CIBIL score.
Myth 3: CIBIL is the only bureau in India
Many people are unaware that there are over three other bureaus in India, excluding CIBIL, licensed and operated by Reserve Bank of India. These bureaus are Equifax, CRIF High Mark, and Experian. However, CIBIL is reliable for the four credit bureaus in the country.
Myth 4: Loan rejection does not have any impact on CIBIL Score
Fact: At the time of your loan application, lenders check on your CIBIL score as it gives them a fair idea of your creditworthiness; it helps them gauge your repayment capacity, the previous loan inquires, and your existing loan holdings. Even if your loan application rejected, the CIBIL score would decrease, which will further reflect too many credit inquiries and make you ineligible to fetch a loan from other lenders.
Myth 5: Your CIBIL Score is the only factor that decides the fate of your loan application
CIBIL Score is not the only factor that lenders check on when assessing your loan application. Income, job profile, income to debt ratio, job stability, residence status, and other elements impact your claim and influence the loan amount and the interest rate you are eligible to get.
Myth 6: If you are married your CIBIL score increases
Your credit score is a reflection of your own credit-history irrespective of your marital status. Holding a joint account with your partner does not have any impact on your score.
Myth 7: Bad credit score will stay the same forever
Your credit score will not stay the same always. You can still work towards improving it by practicing good and responsible credit behavior.
Few steps that will help you increase your civil score:
- Don’t delay your credit card and loan EMI payments
- Don’t use a credit card for making every purchase.
- Ensure you don’t swipe more than 30% of your credit limit each month
- Maintain a healthy financial loan bag, i.e., a mix of secured and unsecured loans
- Don’t make multiple loans and credit card inquiries
- Review your credit report each month
- Don’t become a loan guarantor for your friend or family member if you think there are high chances of defaulting on the payment. If the borrower fails to make the payment, it can harm your score, and you would be responsible for paying off the loan EMIs if the primary account holder is unable to pay off.
Myth 8: Being a loan guarantor or does not impact your Cibil Score
Fact: If the primary account holder fails to pay off the loan, it is the loan guarantor responsible for paying off the mortgage. In the event of default made by the primary account holder, it is also the guarantor’s credit score that impacts.
Myth 9: CIBIL score increases if Income Tax Return filed on time
Fact: Your Income Tax Return filing is not related to your civil score in any way. It is crucial you work towards improving your credit behavior to improve your score.
Myth 10: CIBIL Score can be checked by anyone, anytime
Fact: lending institutions can only review the CIBIL score if you apply for a loan or credit card
Myth 11: Loan foreclosure has a high impact on your CIBIL Score
Foreclosing a loan or credit card debt reflects responsible credit behavior, thereby improving it.
Myth 12: Credit card closure does not impact your credit score
If you have sustained a good repayment record and hold no outstanding on the card, you shouldn’t close the ticket. If you have an old credit card for which you have made all the repayments on time, closing the same means you will lose on the secure credit history you have built.
Myth 13: Checking credit score decreases it
While multiple credit inquiries impact your score, if you check the report by yourself, your credit score does not drop. Regular checking of the credit report is healthy as it helps you understand the mistakes in the story.
“Being aware of the above Cibil score facts is imperative as it helps you stay more responsible with your credit and guides you on avoiding the mistakes. You will have no reason to worry about availing new loans when you require it, as the score combined with various other factors will help you fetch a high amount at a low rate of interest. Be responsible financially for ensuring that you maintain a healthy financial future.” Concludes Viral Bhatt, Founder at Money Mantra in an interview with Prittle Prattle News.
