The Credit Information Bureau (India) Limited, commonly known as CIBIL, plays a crucial role while applying for a loan. CIBIL scores, ranging from 300 to 900, reflect your creditworthiness and are used by lenders such as Poonawalla Fincorp to assess the risk of extending credit. However, several myths surround CIBIL score, creating confusion among consumers. Read on to bust those myths and get clarity on credit score facts.
Breaking the CIBIL Myths with Poonawalla Fincorp
Following are the CIBIL myths and the actual facts about your CIBIL score:
Myth 1: Checking your CIBIL score frequently will lower it.
Reality: Contrary to this belief, checking your CIBIL score does not impact it negatively. Regularly monitoring your credit score is a responsible financial practice. It allows you to stay informed about your credit health and take necessary actions to improve it.
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Myth 2: A high income guarantees a high CIBIL score.
Reality: A higher income can positively influence your ability to manage credit, but it does not directly determine your CIBIL score. Your payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries are crucial factors affecting CIBIL score. A disciplined approach to managing credit is essential, regardless of income level.
Myth 3: Paying off all debts will instantly boost your CIBIL score.
Reality: While paying off debts benefits your credit score, the impact may take time. CIBIL score considers various factors, and improvement takes time. Consistent, responsible credit management, including timely payments and maintaining a healthy credit mix, contributes to a gradual and sustainable increase in your credit score.
Myth 4: CIBIL score is the only factor lenders consider.
Reality: Lenders use the CIBIL score as one of the key factors when assessing creditworthiness, but they also consider other aspects, such as your income, employment history, and existing debt obligations, when determining your loan eligibility.
A high CIBIL score alone may not guarantee credit approval, and lenders conduct an evaluation considering different factors, such as income, employment history, etc.
To conclude
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Understanding the truth behind CIBIL score myths is essential for making informed financial decisions. Regularly monitoring your credit score, maintaining a diverse credit portfolio, and responsibly managing your credit are vital to a healthy credit profile.
A lot of times people aren’t aware that having a good credit score can get them a loan at a lower interest rate. Mr. Abhay Bhutada, MD, Poonawalla Fincorp says, “We have observed that during festive season, people end up taking high-interest loans without doing proper due diligence despite having a good credit history and high credit score which creates unnecessary burden of paying high EMIs.”
So, it is important to bust credit score myths and work towards achieving and maintaining a favorable credit score.