The saying \u201cHalf knowledge is more dangerous than ignorance\u201d, is especially true when it comes to your credit score and how it relates to your loan approval. Your credit or CIBIL score defines your creditworthiness and, in turn, decides whether your bank will approve or reject your personal loan application. To have a smooth borrowing experience, it\u2019s important you hold all the right information about the CIBIL score and stay away from myths.<\/p>\n\n\n\n
In this article, we\u2019ve compiled and debunked some common credit score-related myths. Let\u2019s take a look.<\/p>\n\n\n\n
A credit score represents your financial past and not your future. A bad credit score doesn\u2019t last forever, provided you follow best practices.<\/p>\n\n\n\n
For a good credit rating, pay all your credit card bills and EMIs on time. Additionally, paying your utility bills on time can also help you boost your CIBIL rating.<\/p>\n\n\n\n
Your CIBIL score has nothing to do with your annual income. A person with an annual income of Rs. 4 Lakhs can have a credit score above 800. Similarly, a person with an annual income of above Rs. 10 lakhs can score below 700. The rating solely depends on your credit usage and how consistently you repay your dues.<\/p>\n\n\n\n
This depends on the type of enquiry you\u2019re making. When you apply for<\/strong> a personal loan<\/strong><\/a>, the bank runs a hard enquiry on your CIBIL score. If you have multiple hard enquiries to your name, your credit score will go down.<\/p>\n\n\n\n On the other hand, if you\u2019re checking your credit score using an online portal, it counts as a soft enquiry. Making multiple soft enquiries doesn\u2019t affect your CIBIL rating.<\/p>\n\n\n\n The transactions you\u2019ve made using your debit card don\u2019t affect your credit score. A debit card is a tool to access your savings account and you\u2019re not borrowing any credit when you use it. Hence, CIBIL won\u2019t add this transaction to your credit history. Only using a credit card or a loan can help you open your credit history and, in turn, improve your credit score.<\/p>\n\n\n\n You can build your credit score by closing your loan. Unfortunately, the same doesn\u2019t apply to credit cards. You may think it\u2019s a safe move to cancel your credit card if you don\u2019t use it much. However, this can negatively affect your credit score.<\/p>\n\n\n\n Credit rating agencies check your capacity to handle multiple lines of credit. If you close one line of credit, it may look as though you can\u2019t manage your dues. Instead, use it to make nominal transactions from time to time. In any case, closing the account won\u2019t impact your credit rating positively.<\/p>\n\n\n\n Many borrowers assume that low credit ratings can result in the rejection of their personal loan application. While your credit score is one of the crucial factors taken into account by banks, it\u2019s not the only one. Other factors like your income and repayment capability take precedence over your CIBIL rating.<\/p>\n\n\n\n However, one important thing to remember is that banks will charge you a relatively higher personal loan interest rate<\/strong><\/a> if you have a lower credit score.<\/p>\n\n\n\n In a nutshell, research well before applying for a personal loan. Don\u2019t let misconceptions keep you away from a good deal. Also, make sure to check the credit policy of the lender.<\/p>\n\n\n\n Looking for a personal loan? Well, IndusInd Bank can be your perfect loan partner. We offer competitive personal loan interest rates, minimal documentation requirements, and an easy 4-step online application process.<\/p>\n\n\n\nMyth #4: Your Debit Card Can Help You Build Your Score<\/strong><\/h2>\n\n\n\n
Myth #5: Closing Your Credit Card Can Help You Improve Your Score<\/strong><\/h2>\n\n\n\n
Myth #6: Low Credit Score Leads to Application rejection<\/strong><\/h2>\n\n\n\n
In Summary<\/strong><\/h3>\n\n\n\n