Some Common Myths About CIBIL Score

In this day and age, a person’s CIBIL score not only impacts their ability to avail of credit and the capacity to do so on the most beneficial terms and conditions but also their chances of landing their desired job or even renting out a place of their liking. An individual’s credit score demonstrates their attitude towards credit and ability to repay loans on time. A high CIBIL score is considered a sign of high creditworthiness and repayment capacity. Therefore, having a good CIBIL score is vital and so is having a very clear understanding of what does and what doesn’t affect the CIBIL score for home loans. In this article, we bust some common CIBIL score myths so that credit users have complete clarity regarding things they should do to improve CIBIL scores. 

Most Common Myths About CIBIL Score 

Your Income Affects Your CIBIL Score 

Many credit users assume that individuals with higher incomes have higher CIBIL scores. However, income cannot have any direct impact on a person’s CIBIL rating. What one earns certainly impacts one’s ability to pay bills on time. Therefore, while income does not directly affect one’s credit score, an indirect connection between a good income and a good CIBIL score cannot be denied. 

Checking CIBIL Score Lowers It

CIBIL score enquiries can be categorised into two broad types: soft enquiries and hard enquiries. When credit users check their CIBIL score through a reliable platform or one of the credit information agencies, the enquiry they make is known as a soft enquiry. Soft enquiries have no impact on a person’s credit score. On the other hand, when someone applies for a loan or a credit card, the enquiry originates from a lender. Such enquiries are called hard enquiries. Too many enquiries about a credit user from lenders portray the credit user to be excessively dependent on credit and therefore, can cause a person’s credit score to decrease significantly. Thus, one must never apply for too many loans and credit cards simultaneously.

Carrying a Balance on My Credit Cards Will Boost My CIBIL Score

The term credit utilization ratio indicates the credit used to the credit available. Maintaining a balance on your credit cards will not only cause your credit utilization ratio to go up but also increase your monthly expenditure by increasing the total monthly interest payout on one’s debt. In summary, credit users must learn to clear the entire amount due on their credit cards at the end of each month. 

Repaying Loans Will Help Boost My CIBIL Score 

Yet another CIBIL score myth is that repaying loans increases one’s CIBIL rating. Well, if the outstanding amount on your credit cards is too high, repaying your credit card bill will cause your credit utilization ratio to come down, which in turn, will positively impact your credit score. However repaying home loans or loans against property before the agreed tenor won’t necessarily affect your CIBIL score. However, it will most certainly benefit you by reducing your EMI liability as well as the total interest payout on one’s loan. 

Young People Need Not Worry About Their CIBIL Score 

Many people also believe that they need not start worrying about their CIBIL score until they start a job or take a proper loan, such as a home loan. This is another CIBIL score myth. It does not matter how old you are, if you have a credit card under your name, you should maintain your CIBIL score. 

Conclusion 

This article talks about the most common myths related to CIBIL score. It explains that income does not directly affect the CIBIL score, checking CIBIL score doesn’t lower it, carrying a balance on credit cards doesn’t boost the score, and repaying loans won’t necessarily increase the score. The article also emphasizes that young people should not ignore their CIBIL score as it affects their creditworthiness, job prospects, and ability to rent a place.