When you want approval for a suitable credit card as per your preference, your credit score is an important factor looked at by creditors. However, there are various myths concerning credit scores that you generally may have and busted here are some of them. Before this, note that you can do your free CIBIL score check by visiting CIBIL check online website.
Misconception no. 1 – Reviewing your credit score will lower your score
Fact – This is not true. The idea here is checking your credit report reduces your credit score is considered one the widespread myths. However, this is not true as doing so is looked upon something as a soft pull. A propelled draw impacts your score more than your soft pull. The process of applying for a credit card is known as a hard pull.
Misconception no. 2 – Cancelling your credit card will improve your credit score
It does not. Many individuals often believe that closing credit cards they do not use would ameliorate their score but doing this has a negative impact on your score. Your ratio of credit usage is considered by the credit scoring system when deciding your score. Your available credit card limit falls when you cancel your credit card, which may make your CUR (credit utilization ratio) enhance and your credit score fall.
Misconception no. 3 – You cannot get a credit card or loan with a low credit score
CIBIL score continuously keeps changing. Having a low credit score does not always mean you will not be approved loan or credit card. Your credit score will enhance as you repair your credit profile.
Misconception no. 4 – It is difficult to maintain a good past credit record
Lenders generally look for those borrowers who conduct timely repayments and understand their credit management ways, so having zero credit history is a poor indication. Thus, it would be ideal to have zero credit.
Misconception no. 5 – Credit score can also be built by the debit card
A debit card is just a tool that you can simply use to effectively manage your bank account. Your debit card does not help in managing your credit history. As an outcome, applying or using a debit card has zero impact on your credit history or credit score.
CIBIL score is universal in the sense that it might be applied to your various transactions that include credit cards loan, loans, mortgages, etc. Banks can use credit scores at any time in a credit lifecycle.
Misconception no. 6 – Reviewing your credit report will hamper your credit score
One of the common misconceptions that many fall for is that regular credit report checks can hamper your credit score, but that is not the scenario, as checking your score is looked upon as a soft pull. A soft pull does not change your score, but a hard pull does. Whenever you place an application for a new credit card, it is thought to be a hard pull.
Misconception no. 7 – CIBIL score is meant to support financial institutions and banks only.
The next myth is. Many believe that CIBIL is majorly meant for financial institutions and banks, but that is not the scenario as it permits you to use the credit properly so that you can make a better decision financially.
Misconception no. 8 – CIBIL is completely authorized to make rectifications of your credit report.
CIBIL cannot make any corrections to your score till it is requested or approved by your financial institution. CIBIL can just assist you in making your process simpler.
Misconception no. 9 – Better job? Better credit score
Many have started to believe that availing of a better job will assist in getting a good credit score. However, this is a misconception, as your credit report is wholly dependent on the credit you have used and the way you manage your debt. It does not involve your earnings, nor does it mention anything about your job.
Misconception no. 10 – Low CIBIL score equals no credit card or loan for a lifetime
CIBIL scores continue to change over time, which means having a low score will not be constant. If you show disciplined behaviour towards credit, then your chances of having a good credit score also increase. This further enhances your chances of getting a loan or credit card.
Misconception no. 11 – CIBIL scores are impacted by investments and assets
Your CIBIL score is entirely dependent on credit cards and loans, which may mean that it will not change when you purchase a new asset or make any new investments.
Misconception no. 12 – CIBIL score is just the determining parameter for assessing your loan application.
While CIBIL plays a crucial role in endowing your financial institution with an idea about your credit profile, it is not the only parameter considered by a lender while offering you a loan. Many other parameters are factored in, like assets, income, investments and more.
Misconception no. 13 – Applying for loans with multiple lenders is not bad for credit score
Many believe that if they reach out to multiple banks or finances for loans, their chance of availing of a loan improves. That is not the scenario, as doing so is looked upon as a hard inquiry, and it might take a negative toll on your score.
Misconception no. 14 – Credit score is based on your annual income
As discussed previously, your income is not factored in when computing your score. It is completely dependent on how you manage your loan, credit cards and debts. An individual with zero debt and Rs 5 lakh per annum income might have a better credit score than one with high debt and a yearly salary of Rs 15 lakh.
Misconception no. 15 – No credit is ideal
Having zero credit history is even a poor sign for lenders as they generally look out for people who make constant payments and know how to manage credit limits. Thus, having no credit must not be considered a good deal.
