CIBIL: 6 common misconceptions about credit scores you should be aware of

So, it goes without saying that a good credit score is indispensable for anyone to procure a loan. However, there are a slew of misconceptions about CIBIL score.

Here are six key misconceptions:

Checking your score hurts it: This is a widespread misconception. Checking your CIBIL score, also known as a soft inquiry,  does not  affect your score. In fact, it’s recommended to monitor your score regularly to identify any errors or suspicious activity.

Closing old accounts leads to improvement: Not necessarily. Closing old accounts can actually shorten your credit history, which is a significant factor in determining your score. It’s generally better to maintain good standing on older accounts, even if they are inactive.

CIBIL is the only credit bureau: CIBIL is a major credit bureau in India, but it’s not the only one. Other bureaus like Experian and Equifax also provide credit scores and reports.

Bad score lasts forever: Not true. With consistent improvement in your credit habits, like paying bills on time and maintaining low credit utilisation, your score can improve over time.

Credit score depends on income: Your income is not a direct factor in your credit score. However, your credit utilisation ratio (outstanding credit compared to credit limit) can be. So, someone with a high income who spends heavily on credit might have a lower score than someone with a lower income who manages credit responsibly.

Married couples have a combined score:  Each person in a marriage has their own credit score. While a joint loan application might consider both scores,  they aren’t merged into one.

These are just a few of the common myths about CIBIL scores. By understanding how your credit score works, you can take steps to improve it and access better financial opportunities.

Frequently Asked Questions:

How often should you check your credit score?

Most experts recommend to check the credit score at least once a year. 

Does checking your credit score hurt it?

Checking your CIBIL score, also known as a soft inquiry, does not affect your score.

In order to maintain a good credit score, is this important to pay each bill on time?

Payment history is a significant factor in determining your credit score. Even a single missed or late payment can negatively impact your score.

Is payment of debt enough to maintain a good CIBIL score?

Paying off debt is indispensable to maintain a good credit score. However, it is a responsible financial management that leads to a good CIBIL score.

Can there be mistakes in credit reports?

It is not uncommon to spot mistakes on credit reports. So, regularly checking your credit score allows you to spot any errors, such as inaccuracies in personal information or incorrect reporting of accounts or payments.

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Published: 26 Mar 2024, 07:28 PM IST