CIBIL (Credit Information Bureau (India) Limited) score is an important factor when it comes to getting a loan or a credit card. It is a three-digit number that represents an individual's creditworthiness. The score ranges between 300 and 900, with 900 being the highest. However, there are many myths surrounding the CIBIL score that need to be debunked. In this article, we will discuss some of the myths and facts you need to know about the CIBIL score.
Myth 1: Checking your own CIBIL score will lower it
Fact: This is one of the most common myths about the CIBIL score. However, it is not true. Checking your own CIBIL score will not lower it. In fact, it is recommended that you check your CIBIL score regularly to keep a tab on your credit health. You can check your CIBIL score for free once a year.
Myth 2: Having a high income means a high CIBIL score
Fact: Your income is not a factor that affects your CIBIL score. Your credit score is determined by your credit history, which includes your credit utilization, payment history, credit mix, and credit inquiries. So, even if you have a high income, if you have a poor credit history, your CIBIL score will be low.
Myth 3: CIBIL score is the only factor that determines loan approval
Fact: While the CIBIL score is an important factor that lenders consider when approving a loan, it is not the only factor. Lenders also consider your income, employment history, and other financial factors when deciding whether to approve your loan application.
Myth 4: Closing old credit cards will improve your CIBIL score
Fact: Closing old credit cards can actually lower your CIBIL score. This is because your credit utilization ratio will increase if you close a credit card. It is recommended that you keep your old credit cards active and use them occasionally to maintain a healthy credit mix.
Myth 5: Settling a loan will not affect your CIBIL score
Fact: Settling a loan can have a negative impact on your CIBIL score. When you settle a loan, it means you did not pay the full amount that you owed. This can be seen as a red flag by lenders, and it can lower your creditworthiness.
Conclusion
It is important to separate myths from facts when it comes to the CIBIL score. Checking your own score, maintaining a healthy credit mix, and making timely payments are some of the ways to improve your creditworthiness. Remember that your CIBIL score is just one factor that lenders consider when approving a loan, and it is not the only factor.
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