Top CIBIL Myths You Need To Stop Believing Right Now!

Nowadays, lenders no longer offer loans without first examining your credit report. A higher score usually increases your chances of being approved for a loan because the lender will be more confident in your ability to repay the debt. Thus, a strong credit score is essential if you want to avail of any loan with better interest rates. However, there are some myths or misconceptions about CIBIL full form, which is Credit Information Bureau (India) Limited, that continue to circulate because of ignorance. It is a cause of concern because falling for the myths can get you into problems; in this blog, we will be talking about common myths. 

CIBIL score will be reduced if we check the report quite often

An inquiry is created when a CIBIL full form which is Credit Information Bureau (India) Limited, score is examined by a customer. Two sorts of queries can be made: A “soft inquiry” is made when a customer views his or her own credit report; it has no impact on the customer’s credit score. It is referred to as a “hard inquiry” if lenders (banks, NBFCs, etc.) ask Cibil to examine a customer’s credit or CIBIL score. A credit score is impacted by hard inquiries. Therefore, a lot of hard inquiries in a short period of time could hurt your credit score.

Poor CIBIL score leads to rejection of the loan.

Your loan application will not always be denied because of your low Cibil score. Other factors, such as the borrower’s income, the co-applicants credit score, the applicant’s reputation, etc., are also significant when making the decision to disburse funds or not. 

Cibil is the only place to obtain a credit report or score.

The phrases “CIBIL” and “credit score” are frequently used interchangeably. Transunion Cibil( CIBIL full form is Credit Information Bureau (India) Limited), on the other hand, is a credit agency that offers credit scores similar to those from Equifax, Experian, and Crif High Mark. These four Indian credit bureaus have been given authorization by the RBI to produce credit reports. Each of the four bureaus has the same standards for offering credit reports. To determine credit ratings, each agency has its own list of factors. Due to this, debtors’ ultimate credit scores can occasionally change.

Believing that becoming a guarantor or co-borrower won’t have any fallout on your CIBIL score

People frequently agree to be guarantors or co-borrowers on loan applications without realizing what this means legally. In the event that the principal borrower defaults on loan, the guarantor or co-borrower is obligated to repay the principal amount plus interest. Moreover, the major borrower’s default will have a negative impact on his or her score.

A good score is equal to a loan with a lower interest rate.

The borrower is assessed based on a variety of factors, not just a strong credit score, including age, income, banking activity, past credit history, kind of asset mortgage, etc. The lender has the option of rejecting the application or raising the interest rate if any of the criteria are not met.

No debt equals a higher credit score.

The general public has the misconception that if you don’t have any loans or credit cards, you must automatically have a good credit score. It’s not true. The CIBIL score of a person with no credit history is -1.

CIBIL can modify my information

Every month, the financial institutions that have cooperated with CIBIL receive records on every loan borrower. Cibil compiles and aggregates all credit data. They are not permitted to change any borrower’s information. Cibil keeps the records updated without changing any of the information about the borrowers.

Anyone is allowed to verify my CIBIL

Either the loan borrower himself or herself or registered financiers are authorized to generate your CIBIL (CIBIL full form is Credit Information Bureau (India) Limited) score after taking the borrower’s permission.

Your investments or savings will raise your CIBIL score.

Your past credit card and loan repayment records are the only factors that go into your credit or CIBIL score. Your savings account balance, mutual funds, insurance coverage, etc., are unrelated.

A low credit score is permanent.

Your financial history is depicted by your credit or CIBIL score. However, this does not imply that a poor score will follow you around forever. Try to establish a solid credit history, which will eventually lead to a strong credit score. You can build a good score and let the negative transactions from the past disappear if you make it a habit to follow all the best practices and advice. A transaction typically remains on your report for three years. Information like bankruptcy and payment defaults may be retained for up to ten years. 

Your annual income will determine your credit score.

Your annual income has no bearing on your credit score. An individual is having a yearly salary of Rs. 5 lakh may obtain a score of 816. Similar to the previous example, it is also feasible for someone with an annual income of Rs. 10 lakh not to have a credit score. How many credit lines you have and how well you manage them both affect your credit score.

If you earn Rs. 10 lakh per year and have never used a credit card or taken out a loan before, you could not even have a credit score. For instance, you might earn Rs. 5 lakh a year and have a credit card.

Your scores will be merged if you get married.

There is nothing like merging credit scores in reality. Irrespective of your marital status, credit scores are determined based on individual financial habits. Your credit history and score will remain unchanged if you have shared bank accounts.

Credit Scores are Increased by Debit Cards

Debit cards don’t help you establish a credit history or raise your credit score. Any transactions made using a debit card will not be taken into account for determining your credit history or credit score because a debit card is only a tool for accessing your savings account balance and does not cover the idea of “credit.” To start building your credit history, you must apply for a credit card or loan. Your credit score will be created once your credit history has been established. The transition from NA to a score, however, will take a few months.

A high credit score is essential to your financial stability since it can give you access to the best offer on loans and credit cards. The process of building a high credit score through responsible behaviour, however, is ongoing. One must be aware of the “good and desired” behaviours that boost your credit score and avoid the ones that can drastically affect your score.