A CIBIL or credit score is a numerical summary of your credit rating, report, and history. It ranges between 300 and 900; the closer your rating is to 900, the higher your score. It is an important number that influences whether you get great terms and interest rates for your loans, insurance, etc. It determines whether you are creditworthy and handle your finances well. Your loan repayments, credit bills, loan inquiries, and other factors influence your credit score.
At the same time, credit scores are riddled with myths that hamper what everyone thinks about it. So, review some common myths below and make a free CIBIL score check to improve your rating consistently.
Most Common Myths About Credit Scores
Some of the misconceptions related to credit scores include the following:
Myth 1: Credit Score Reduces with Regular Checking
One of the most common misconceptions is that checking your CIBIL score regularly reduces it. This is only a myth; in reality, you can make a free CIBIL score check as often as you want. You can observe your score through CIBIL’s official website or third-party channels. Monitor your score frequently so that you can detect any discrepancies affecting your financial credibility and be updated on your creditworthiness.
Myth 2: Credit Score Increases by Closing Old Accounts
Some people believe credit scores improve by closing unused or old credit accounts. It is not true. Instead, it has the opposite effect. Your credit history plays a significant role in influencing your credit score. You can display a longer credit history by keeping your old, inactive accounts open. This is viewed positively by lenders. Make timely repayments and maintain a low balance on such accounts to affect your credit score positively.
Myth 3: A Good Income Guarantees a High Credit Score
It is crucial to earn a handsome income, but it is not the credit score’s only determinant. Your creditworthiness is significantly evaluated based on your financial responsibilities and past credit behaviors. Your credit score is influenced by low credit utilization, timely payment of credit card bills and loans, and maintaining a mix of credit accounts. So, manage your credit responsibly, irrespective of what your income is.
Myth 4: Settling Debts Removes Negative Remarks
The negative remarks on your credit report are not wiped away even if you settle your outstanding debts for less than what you owe. The debt record will remain but show that the amount has been settled. It will affect your CIBIL score somewhat since it communicates that you have not repaid the amount originally agreed. The best thing in this circumstance is to clear your debts and maintain a fully clear repayment history.
Myth 5: Chances of Approval are Improved with Multiple Loan Applications
Several people believe that making multiple loan applications boosts the chances of approval for at least one of the applications. But, this is incredibly risky since lenders make a hard inquiry into your credit report when applying for credit. So this decreases your credit score, and many hand inquiries indicate credit-hungry behavior and raise red flags. It makes lenders doubt your creditworthiness. So, the only thing you can do is apply for only those loans that align with your credit profile. You must also research thoroughly after making a free CIBIL score check.
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Conclusion
Make informed financial decisions by debunking the common CIBIL score myths. Make a free CIBIL score check frequently without misgivings, and focus on improving your credit score. Maintain a healthy credit history by managing your credit accounts responsibly. Also, use some strategies to build a great credit score efficiently and then work on maintaining that. A good score is advantageous in more ways than one and helps you every step of the way with every loan application. But ensure you don’t make too many of them since you should not raise any red flags.
Ultimately, lenders prioritize your application and give you a great interest rate if you have a good CIBIL score. So use the CIBIL score app to inquire into your history and keep it in top condition. That will pay you off in the long run and benefit you.
