In India, there is still lack of awareness and misconceptions about CIBIL score. Often, the CIBIL score is confused as the only credit score that evaluates a consumer’s creditworthiness and past credit behaviour. Many consider that ‘CIBIL score’ and ‘Credit Score’ to be the same, which is incorrect. Credit score is a general term used by the credit bureaus that depicts your past credit behaviour, whereas CIBIL score is the specific credit score generated exclusively by TransUnion CIBIL.
As per the RBI, there are four leading Credit Information Companies (CICs) in India that has the license to calculate and generate credit scores for individuals and businesses, named as TransUnion CIBIL, Equifax, Experian and CRIF High Mark. TransUnion CIBIL is the leading credit bureau that calculates, generates and maintains credit scores for consumers across India. To maintain or improve your credit score, it is important to check your credit score online for free and receive monthly updates from credit bureaus with no impact on your credit history.
In addition, you also need to be aware of the top myths and common misconceptions regarding your CIBIL score, as it helps the lenders to analyse your creditworthiness and ease the loan approval process. Further discussed are the common myths and misconceptions regarding your CIBIL score that you should never fall for.
Top 7 Myths regarding your CIBIL score
Myth: Income assists in determining CIBIL Score
Fact: This is the most common myth because CIBIL score is calculated and generated based on the details of past and existing credit products, such as loans and credit cards. Your income is not considered by the credit bureau and is neither the determinant factor in the generation of your CIBIL score. Moreover, it is not even reflected in your CIBIL report, along with other vital components.
Myth: CIBIL Score is generated on the basis of Repayment History
Fact: Repayment history is one of the important factors in the calculation and generation of your CIBIL score. However, there are other factors as well that contribute in the process, such as length of credit instruments, repayment history, debt to income ratio, credit mix, credit utilization ratio, etc. Therefore, the repayment history is not the only parameter in evaluating your CIBIL score.
Myth: CIBIL maintains Defaulter’s List
Fact: TransUnion CIBIL never maintains any list of defaulters, as it only collects and maintains the consumer data as provided by the banks and NBFCs on the monthly basis. If you want to know regarding any default or error in your CIBIL report then you can directly contact your lending bank or financial institution, as well as you can raise a dispute by filling CIBIL dispute resolution form at its official website.
Myth: CIBIL score reduces, if we check it
Fact: Checking your CIBIL score does not reduce it. There are two types of inquiries when your CIBIL score is checked. The first one is when you check your CIBIL score for tracking/monitoring purposes. It is considered as a ‘Soft Inquiry’ and it does not negatively affect your credit score. The second type of enquiry is when a lender (Bank or NBFC, etc.) requests CIBIL to check your credit score. In this case, CIBIL score may be reduced, as it is called as ‘Hard Inquiry’ and hard enquiry affects the credit score.
Myth: Closing your Loan account deletes poor repayment history
Fact: CIBIL stores and maintains consumer data, as provided by the lenders for the past 7 years in their database. Even if you close your existing loans or credit cards, the past information of payment history stays on your CIBIL report for a long time. There is no point in closing your old account or credit card as they help to rather improve your CIBIL score gradually.
Myth: CIBIL report is not confidential and can modify information
Fact: CIBIL report is truly confidential as the approached lender and credit bureau itself can only view it. TransUnion CIBIL collects the consumer information as provided by the financial institutions on a monthly basis. It mainly collates, consolidates and manages credit information provided to them. CIBIL does not have the authority to delete or modify any borrowers’ details.
Myth: Timely ITR filing and savings, increase your CIBIL score
Fact: These are the basic financial practices followed by the taxpayers. However, these actions have no impact what-so-ever on your CIBIL score, as it neither increases nor diminishes. Filing an ITR, as well as your savings and investments has no impact on your credit score. Only credit products, such as loans and credit cards are considered by credit bureaus in generating CIBIL score.
Conclusion:
Lenders get assurance of your creditworthiness only when they check your CIBIL score. So, it is highly recommended to maintain a good CIBIL score to avail funds at ease. Applicants who are at low-risk for banks are preferred for any fresh credit with added benefits and concessions. Therefore, now you can avoid or ignore all the above-mentioned myths regarding the CIBIL score and start building and improving your credit score to avail funds in near future.
