CIBIL Score represents the credit worthiness of the borrowers. The score that usually ranges from 300-900, serves as a yardstick to determine if you are eligible for a loan. A CIBIL score above 700 is usually considered good and you can avail a loan at attractive interest rates. With so much information regarding CIBIL Score available online today, there are some myths and misconceptions regarding CIBIL Score. This leads to a lot of confusion among borrowers, which can lead to some wrong decisions, thus affecting their CIBIL score.
Let’s take a look at some common CIBIL Score myths that you should not fall for.
Myth 01: Frequent checks can affect your CIBIL score
Fact: CIBIL Score can be affected by the kind of inquiries you make. There are two types of credit score inquiry – hard and soft inquiry. A hard inquiry is the inquiry, when you apply for a credit card or loan and the lender checks your profile. Multiple hard inquiries are sure to bring down your CIBIL score and they always reflect in the report. It also might indicate your desperation for the requirement of loan.
In case of soft inquiry, it is the inquiry made by you to check your CIBIL Score. Examples include checking free credit report or seeking information from marketing agencies regarding loan or credit card. It is not reflected in your credit report; hence your score will not be affected.
Myth 02: CIBIL holds the right to change the credit reports
Fact: This is not true. CIBIL does not hold the right to make any amends in the credit report. The information of the borrower is already present with the bank/NBFC. Necessary changes can be made by CIBIL, only if it is authorized by the financial institution, otherwise they cannot update anything on their own.
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Myth 03: Only your CIBIL Score serves as the deciding factor for your personal loan approval
Fact: Yes, your CIBIL score is undoubtedly one of the major factors that decides your personal loan approval. But, it is not the only factor. A lot of other factors are also considered by the lenders when assessing the borrower’s application. These include age of the applicant, income, alternative sources of income, location, repayment track record etc. Hence, CIBIL Score is not the only factor that is taken into consideration when lenders assess the personal loan application.
Myth 04: Closure of your credit card account can lead to boosting of your CIBIL score
Fact: This is one of the major CIBIL score myths. Credit agencies and lenders do not check your credit and not concerned about of how much credit you have. They are concerned with the way you manage the credit, that is currently in use. They check if there are any outstanding dues that you need to repay. Closing your credit card account will not have much of an effect on your CIBIL Score.
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Myth 05: Your CIBIL score can be affected by assets/investments
Fact: A credit report contains details regarding your loan repayment and credit card bills. It does not include information related to your assets, investments etc. If you miss an EMI payment or credit card bills, your score will definitely be affected. It thus creates a doubt in the lender’s mind that you will not be able to pay the loan. Your earnings or assets play no role in affecting the CIBIL score.
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Now that most of your CIBIL score myths have been debunked, check your CIBIL Score for free at Finserv MARKETS. With a customized Financial Health Check Report (FHCR), you can get detailed view of your credit information and it will you help take proper financial decisions in future.
