Your CIBIL Score, often referred to as the ‘financial health report card’, holds significant weight when it comes to securing loans, credit cards, or even renting an apartment.
Unfortunately, there are several misconceptions floating around about this crucial financial metric. Fear not, for in this article we will dismantle 5 common myths about CIBIL Score and separate fact from fiction.
Myth 1: Checking my credit score regularly lowers it
One of the most widespread misconceptions is that accessing your credit score frequently can harm it. However, this is nothing but a myth. In reality, checking your CIBIL Score often, whether through official channels or credit bureaus, does not have any negative effect. Monitoring your score is an essential practice as it helps you stay updated on your creditworthiness and detect any discrepancies that may affect your financial credibility.
Myth 2: Closing old accounts boosts my credit score
Some believe that closing old or unused credit accounts can improve their credit score. Well, this is not true. In fact, it can have the opposite effect. Credit history length plays a vital role in determining your credit score. Keeping old accounts open, even if they are inactive, showcases a longer credit history, which is viewed positively by lenders. The key is to maintain a low balance and make timely repayments on these accounts to have a positive impact on your credit score.
Myth 3: Settling debts erases negative remarks
If you settle your outstanding debts for less than the actual amount owed, it is essential to realise that it does not wipe away the negative remarks from your credit report. The record of the settled debt will still remain, albeit marked as "settled." This can have a detrimental impact on your CIBIL Score, as it suggests that you did not repay the full amount as originally agreed. The best approach is to clear your debts in full and maintain a clean repayment history.
Myth 4: A good income guarantees a high credit score
Earning a handsome income is undeniably crucial, but it is not the sole determinant of your credit score. Your creditworthiness is primarily evaluated based on your past credit behaviour and financial responsibilities. Factors such as timely repayment of loans and credit card bills, low credit utilisation, and maintaining a mix of credit accounts influence your credit score. So, it is essential to manage your credit responsibly regardless of your income level.
Myth 5: Multiple loan applications improve chances of approval
Some people believe that applying for multiple loans simultaneously increases their chances of approval for at least one of them. However, this is a risky strategy. When you apply for credit, lenders initiate a hard inquiry on your credit report, which can temporarily lower your credit score. Multiple hard inquiries in a short period raise red flags and may indicate credit-hungry behaviour, making lenders sceptical about your creditworthiness. Instead, research thoroughly and apply only for loans that align with your credit profile.
Debunking these common myths about CIBIL Scores is essential to make informed financial decisions. Remember to check your credit score regularly without fear, and focus on maintaining a healthy credit history by responsibly managing your credit accounts.
Additionally, if you want to build a good credit score efficiently, consider the Bajaj Finserv Credit Pass. This unique subscription offers valuable real-time insights into your credit health and the factors that impact it, monthly CIBIL Score checks, and interactive tools to help you enhance your creditworthiness. By utilising the Credit Pass advantage and managing your finances prudently, you can pave the way to a brighter financial future.
So, embrace a well-informed approach towards your credit health, and let your credit score open doors to numerous financial opportunities!
