Common Myths About CIBIL Scores
Even after technological advancements, many Indian consumers still believe things that hinder their financial growth. The first step to understanding the importance of the CIBIL score is to dispel these myths.
Myth 1: Keeping an Eye on Your Own Rating Lowers It
Fear of losing points is one of the biggest things that keeps people from checking their CIBIL score. This is not true at all. When you view your own score, it is a soft inquiry. When a bank looks at your report to decide whether to give you a loan, that's when hard inquiries happen. Financial experts actually suggest that people do regular self-checks to stay loan-ready.
Myth 2: A Score of 0 or -1 is the Best
A lot of people who are borrowing for the first time think that having no debt means they have a perfect record. But if your score is -1 or 0 (NH - No History), lenders will have a hard time figuring out how you pay back loans. Therefore, lenders tend to prefer applicants with a 750 score over those with no score because the latter is an unknown risk.
Myth 3: Your Score Is Directly Affected by Your Income
Your CIBIL score and your salary are two different things. Your repayment capacity is based on your income, and your repayment intent is based on your score. If you make a lot of money but don't pay your bills on time, your score will be lower than if you make a little money but always pay your bills on time.
Myth 4: Closing Old Credit Cards Wipes Out History
Some people think that closing an old card with a bad history erases the past. In reality, closing old accounts can lower both your "Average Age of Credit" and your total credit limit. This can make your current debt-to-limit ratio look higher, which can make your score drop suddenly.
