Myths about CIBIL score

cibil score

The goal of CIBIL is to provide a clear and transparent picture of financial data that will benefit both lenders and borrowers. A borrower can comprehend his or her credit score and the factors that influence it with the CIBIL Score check online. CIBIL reports are generated on a monthly basis, according to Reserve Bank of India criteria, and are largely utilized by lenders to accept or deny credit applications.

A good credit score is important for your financial health since it can help you get the greatest deals on loans and credit cards. Building or keeping a high credit score through responsible behavior, on the other hand, is an ongoing effort. It is necessary to be aware of the ‘good and desirable’ behaviors that have a positive impact on your credit score and to avoid the negative ones. Here are some common credit score myths that you need to clear in your head:

A bad credit score is permanent.

Your credit score is a short description of your financial history. However, this does not mean that a poor grade will follow you for the rest of your life. You can work to establish a positive credit history and, as a result, a positive credit score over time.

You can create a good score and let the poor transactions fade away if you make it a habit to follow all of the recommended practices and advice. A transaction usually stays in your report for three years. Details like bankruptcy and payment defaults can be kept for up to ten years. 

The only factor used to evaluate loan applications is CIBIL scores.

The CIBIL score assists banks in assessing risks, resulting in increased operational efficiencies and cheaper costs. In addition to their underwriting standards, lenders consider a variety of factors, including the borrower’s income, among others.

Getting rid of old accounts can help you boost your credit score.

Many people feel that having more than two credit cards will affect their credit score negatively. As a result, people tend to cancel their older credit accounts by surrendering their unused credit cards. This can go wrong inadvertently since canceling an old credit account reduces your credit history. A long credit history aids the lender in better understanding your credit behavior.

With an increase in money, my score will improve.

Your credit score is based on how you use credit and has nothing to do with your income. Missed EMI payments, a high credit-utilization ratio, and many loan and best credit cards in India applications, regardless of income, can significantly harm your credit score. Better income, on the other hand, has an impact on your overall loan eligibility because it shows a higher repayment capability. Those with lower income may not be eligible for certain credit cards or high-ticket loans, even if they have a good credit score.

Checking your credit report regularly lowers your scores of credit.

This is a terrible myth because it is advised that you check your credit report on a regular basis and report any discrepancies. While making too many enquiries in a short period of time will hurt your score, checking on a frequent basis is good.

A defaulter list is published by CIBIL.

CIBIL solely keeps track of repayments, calculates credit ratings, and generates credit reports for lenders and financial institutions. Lenders use these reports to accept or deny credit applications based on their needed CIBIL score. The list of defaults is not kept on file by CIBIL, nor is it made public.

A credit reporting agency can help you improve your credit score.

When seeking ways to improve your low credit score, you may come across ‘credit repair agencies.’ Some individuals may misinterpret such organizations as firms that can repair a bad score and raise it to a good score overnight by spending money, based on the name. That is not the case, however.

If you uncover inaccuracies on your credit report, a credit repair business can assist you in filing a dispute with a credit rating agency. The issue might be anything from a spelling mistake in your name to a fault in a transaction in the report that was registered under your name.

The Bottom Line

It’s worth noting that CIBIL reports and scores not only assist banks and other loan providers in determining an applicant’s creditworthiness but also assist individuals in maintaining financial health by keeping a close eye on our scores. Always go for a free CIBIL score check and be familiar with your credit scores at regular intervals.

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