Myths about CIBIL score

There are various articles on the internet about the importance of maintaining a good CIBIL score to speed up your chances of getting a loan approval. But, more often than not this information may get confusing for the public. As a result, many of these people may go on about their works as usual, unaware that this indifference might cause a negative impact on their credit scores.

Nowadays it is extremely important to have a good CIBIL score. RBI has made it compulsory for all lenders to take into consideration the CIBIL report before making their credit approval decisions.

As we mentioned above,there is a lot of wrong information on the internet about maintaining the perfect score therefore we attempt to bust some common myths about the credit score below.

Higher income is the reason for higher Credit score:

CIBIL credit score gets affected by your credit behaviour, not your income. Irresponsible credit behaviour can be shown by high income groups which could lead to low credit scores.It is the length of credit history which helps in strengthening your credit score.

Checking your CIBIL score will have a negative impact on it:

It is said that enquiring about your CIBIL report or CIBIL score may get you a negative marking so many people avoid checking the score.This is quite opposite to what the truth is. infect checking your CIBIL report at least once a year is good financial practice.
Checking your own CIBIL score is considered as ‘soft enquiry’ and won’t have an impact on your score but if credit card issuers or lenders ask CIBIL to give access to your CIBIL report, it will be considered as ‘hard enquiry’ as it will get recorded in the enquiry section of your report.
Loan applications given to many banks at a point of time may lead to enquiries in quick succession which will be tagged as ‘credit hungry behavior’ which will have a negative impact on your score. However checking out your CIBIL report once a year, is like getting a health check.It won’t hurt you score at all.

No credit equals to a good CIBIL score:

Many Indians have grown up with the belief that it is a bad thing to live on credit. There are many of such people who avoid loans and credit cards like the plague and assume their credit score would be perfect because they are not using credit. These people are more in the line of fire than those who hurt their score by over-leveraging themselves.
The people who don’t borrow don’t have a credit history and thus, they cannot be assigned a credit score by any of the credit bureaus. These people would then find it hard to get a loan. Therefore ,it is better to use credit responsibly than have no credit history at all.
Having a credit or taking loans is a good thing as long as you keep making timely repayments.This helps you in maintaining a good CIBIL score and is considered as good financial behaviour.

Conclusion

Responsible use of credit and low credit utilization rate have a good effect on your CIBIL score. If you are doing this then you don’t have to worry when you are in need for credit.
For more details visit www.cibilconsultants.com

Source: Secondary