Due to a lack of adequate knowledge, most people often find it difficult to differentiate the validity and applicability of myths and rumors associated with the CIBIL score. However, most of the misconceptions are still surrounding the CIBIL Score, which needs to be debunked to help you understand the fundamental factors that decide your actual credit score. Hence, here is a compiled list of the most common myths associated with the Credit Score and a reality check on them.
Checking Your Credit Report Damages Your Score
Checking your credit report wouldn’t hurt your CIBIL score at all. When multiple lenders inquire your credit information within a short span of time, it could damage your score and give the prospective lender a wrong impression. In fact, it is a good practice to keep track of your credit report and score once in three to six months.
A Poor Credit Score Stays Forever
A credit score is a snapshot of your repayment history. Once you get a low ranking, it doesn’t mean it will stay with you for a lifetime. In fact, you can attempt to build a positive credit history by following all the good practices and guidelines. Furthermore, you can approach us and get more insights on how to improve your CIBIL score and get that fixed.
Your Credit Score Depends on Your Assets and Annual Income
In general, your CIBIL score depends on how many credit accounts you have, and how well you handle them, not on your annual income and assets. For example, your annual income is Rs.10 lakh and you have never used a credit card and have not taken any loan so far, you may not have a score at all. In reference, you may have a Rs.5 lakh annual income and a well-managed credit card, which will lead to a strong credit score.
When You Get Married, Your Scores Merge
In fact, there is nothing like merging of credit scores. Whatever your marital status is, credit scores are calculated according to individual financial history. Joint bank accounts won’t affect anything about your credit record and ranks whereas joint loan accounts impact your CIBIL score.
Debit Card Impacts Your CIBIL Score
Debit cards don’t help build your credit history or get a credit score. Because a debit card is a tool for accessing your savings account balance and does not cover the ‘credit’ principle, any debit card purchases will not be considered to build up your credit history or credit score.
Applying for Multiple Loans Damages Your CIBIL Score
Many people assume that applying for loans from several lenders increases the probability of a loan being secured. However, as part of a ‘hard’ inquiry, some lenders test your credit history which adversely affects your CIBIL ratings. Therefore, it is necessary to ensure that you do not apply for loans from different lenders at the same time.
Zero Credit History is Ideal
Not Exactly, when you’re a first-time borrower, probably you won’t have any credit history or ranking. Usually, lenders look for responsible credit behavior and regular payments rather than zero credit history or loans. Hence, a proven clean track record is the ideal scenario than no credit history at all.
Paying off delinquent Debts Will Remove the Transaction from Your Credit Report
Do not be under the misconception that paying off a delinquent debt would erase your transaction from the credit history. In fact, it will remain within your credit history for years, impacting your credit score and availability of credit. Such entries in your credit report would show that how you have handled your debts and how effective you were in paying them off. This informs the lenders about your repayment behavior and hence influences the approval of the loan.
Approaching CIBIL Score Repair Agency may Improve Your Score
When you are searching for steps to improve your low credit score, you can find various ‘credit repair agencies.’ Based on the name, some people may mistake these agencies as firms that can fix a low score and raise it up to a good score overnight by investing some money.
But, in general, a credit repair agency helps you file complaints with a credit rating agency, if you find errors in your credit report. The mistake can range from a mistake in your name to an error in a transaction that is reported in the report under your name. If you don’t have the resources or expertise to dispute the mistakes, remove charge-offs, you can take help from the credit repair agency and it will correct those errors on your behalf.
