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Myths Related to CIBIL Score

Myths Related to CIBIL Score

Are you worried about checking your CIBIL score, not knowing what it entails? This must be because of the many myths that hound this term.

Let us strike them out, one at a time.

Myth 1# A low CIBIL score stays on forever

A low credit score is usually a result of inconsistent repayment behaviour. So, if you have defaulted, it does not mean you will have a poor credit score forever. This score keeps updating as you make improvements in your repayment behaviour.

So, if you start disciplining your repayments, your CIBIL rating will shoot up accordingly. And remember, that financial institutions always receive the latest CIBIL report, right after you apply for credit.

Myth 2# Doing a credit report check reduces the credit score

This is an appalling misconception as it is recommended you check your credit report regularly to report anomalies if any. While too many inquiries in a brief timeframe can negatively impact your score, conducting regular checks is fine.

Additional Read: How to Check Your CIBIL Score Online

Myth 3# Credit score depends on annual earnings

A credit score is simply a peek into your repayment history concerning the credit borrowed. It is not a reflection of your income or annual earnings. Therefore, keep in mind that while you may have a large earning capacity, carrying a minimum CIBIL score, would still negatively impact your ability to avail desired credit. At the same time, someone with a low income and a neat credit report may get approval quickly.

Myth 4# Credit card is a hindrance to the score

Many credit cardholders believe that cancelling their credit card may significantly improve their credit score. This is untrue because it isn’t the ownership of a credit card that causes trouble but being irresponsible with it that brings down the CIBIL rating. For example, high credit utilisation or not paying your dues on time will eventually affect your score negatively.

Myth 5# CIBIL can alter the credit score

CIBIL is not authorised to make alterations in any credit report. These reports are created based on credit histories transferred to CIBIL by lenders or financial institutions. While these records are regularly collated and updated by the authority, they cannot alter them in any way.

Myth 6# CIBIL publishes a defaulter list

CIBIL only updates repayment histories, calculate credit scores and create credit reports that are useful for lenders and financial institutions. Lenders evaluate these reports as per their required CIBIL score to approve or disapprove a credit application. CIBIL keeps no record of the list of defaults, let alone publish it.

Myth 7# Credit score is the only factor for loan approval

While a CIBIL rating can be the primary factor taken into consideration during the process of loan approval, it alone is not the ultimate deciding factor. Depending on the type of loan, lenders also consider several other aspects such as earning capacity, employment stability, previous debts, etc. before sanctioning finance. Therefore, a less than ideal credit score cannot immediately disapprove a loan application. Generally, a good credit score is consider 750 and above by most of the financial institution to provide home loan, personal loan and other loans.

Additional Read: All you Need to Know About CIBIL Score

Wrapping up

If you have managed to defunct some of the myths to overcome the worry, turn to Tata capital and apply for a hassle-free loan to shoulder your financial burden with ease. To know more about our loan offerings, log on to our website or give us a call today!

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