The purpose of CIBIL is to give both lenders and borrowers a clear and transparent picture of financial data. With the CIBIL Score, a borrower can understand his or her credit score and the elements that influence it. CIBIL reports are generated on a monthly basis and are widely used by lenders to accept or deny loan applications, according to Reserve Bank of India guidelines. You can check online CIBIL score easily at many of the financial websites.
A strong credit score is beneficial to your financial health because it can help you obtain the best loan and credit card rates. On the other hand, achieving or maintaining a high credit score through responsible behavior is a continuous process. It’s critical to be aware of the “good and desirable” actions that improve your credit score and to avoid the “bad and undesirable” ones. Here are some typical credit score misconceptions that you should be aware of:
A poor credit score is irreversible.
A credit score is a brief summary of your financial history. This does not, however, imply that a poor grade will haunt you for the rest of your life. Over time, you can try to develop a good credit history and, as a result, a good credit score.
If you make it a habit to follow all of the recommended practices and tips, you can build a good score and let the bad transactions fade away. In most cases, a transaction will be recorded in your report for three years. Bankruptcy and payment default information can be stored for up to ten years.
CIBIL scores are the only element used to evaluate loan applications.
The CIBIL score aids banks in risk assessment, leading in improved operational efficiency and lower costs. Lenders evaluate a multitude of factors, including the borrower’s income, in addition to their underwriting rules.
You can enhance your credit score by closing your old accounts.
Many people believe that having more than two credit cards will have a detrimental impact on their credit score. As a result, people are more likely to close outdated credit accounts and surrender unused credit cards. Because closing an old credit account lowers your credit history, this can go wrong inadvertently. The lender can better comprehend your credit behavior if you have a long credit history.
My score will improve as my financial situation improves.
Your credit score is determined by how you use credit rather than your income. Missed EMI payments, a high credit-utilization ratio, and a high number of loan and card applications, regardless of income, can all have a negative impact on your credit score. Better income, on the other hand, has an effect on your overall loan eligibility because it demonstrates a greater ability to repay. Even if they have a decent credit score, those with lesser income may not be eligible for some credit cards or large-ticket loans.
Regularly checking your credit record reduces your credit ratings.
This is a dangerous myth because it is recommended that you review your credit report on a regular basis and report any errors. While making a large number of inquiries in a short period of time will lower your score, checking on a regular basis is beneficial.
CIBIL publishes a list of defaulters.
For lenders and financial institutions, CIBIL is entirely responsible for keeping track of repayments, calculating credit scores, and generating credit reports. Lenders use these reports to decide whether to accept or reject credit applications depending on the CIBIL score they require. CIBIL does not keep a list of defaults on file, and it is not made public.
You can increase your credit score by working with a credit reporting service.
You may come across ‘credit repair agencies’ while looking for solutions to raise your low credit score. Based on the name, some people may perceive such organizations as firms that can fix a negative credit score and boost it to a good credit score overnight by spending money. However, this is not the case.
A credit repair company can help you file a dispute with a credit rating agency if you find mistakes in your credit report. The problem could be anything from a misspelled name to a problem with a transaction in a report that was registered in your name.
Final Thoughts
It’s worth noting that, in addition to assisting banks and other loan or credit card providers in establishing an applicant’s credit worthiness, CIBIL reports and credit scores also aid individuals in maintaining financial health by keeping a careful eye on our credit scores. Always get a free CIBIL score check and keep track of your credit ratings on a frequent basis.