Credit Score Myths

Credit score is a numeric value that describes an individual’s creditworthiness and majorly depends upon the credit history. Due to a lot of information on the web regarding credit scores, there are a number of myths and misconceptions about them that cause a lot of confusion, to the extent where people end up hurting their own scores. Let’s bust a few of these myths here:

Myth 1: Check CIBIL score frequently impacts your credit score

That is not entirely true. There are two types of credit score inquiry – hard and soft.

A hard inquiry is when you apply for a credit card and the lender checks your score. One hard inquiry typically stays on your history for 12 months. If there are multiple hard inquiries in your history, it may appear to the lenders that you are in desperate need for a credit card or loan, which will eventually harm your chances of getting one and bring your score down.

A soft inquiry is when you check your own credit score. Checking your own score in no way affects it, and will never appear in your credit report. If anything, it is good to keep track of it to develop a sense of responsibility regarding credit.

Myth 2: Closing your credit card account will boost your CIBIL score

Credit scoring models don’t focus on how much credit you have. They focus on how much credit you’re currently using, and how you manage it. Hence, closing your credit card accounts won’t necessarily affect your credit score.

Myth 3: There is only one kind of credit score and it impacts your loan approval

There are multiple credit scoring models that are used and an individual’s score depends on which one is used. A lender may assess your application and weigh your credit score, based on various factors like your income, your credit history etc. Based on the factor considered, the credit score can vary accordingly.

Myth 4: A good job makes for a better credit score

Your credit score is predominantly based on your use of credit and management of debt. It will not be only affected by the amount of your income or the profession you are in. As long as you manage your credit well, you are sure to have a high credit score.

Myth 5: Getting married will merge your credit score

There is no such thing as a joint credit score and getting married to someone cannot result in a joint credit score. If you and your spouse have a joint account, that affects both of your individual credit scores. The only way marriage can affect your score is if you take a loan to finance the wedding and fail to repay it responsibly.

To check your CIBIL score for free and learn more about it – download the Finserv MARKETS App now!