The CIBIL score, often known as the credit score, is an important factor in determining a prospective borrower’s eligibility for any loan, secured or unsecured. The three-digit CIBIL score ranges from 300 to 900. It is determined using a variety of factors, including an individual’s credit history and the amount of open loans.
However, there are numerous misconceptions about the CIBIL score and how it is determined. Let’s look at some of the most frequent CIBIL score myths and the reality behind them.
Checking CIBIL score must be considered while making a credit decision. When a credit application is submitted, lenders pull a credit report to evaluate the borrower’s credit repayment history and the risk connected with the proposal. CIBIL generates two types of reports for its users. The first is an individual credit report, and the second is a corporation credit report, also known as a CIBIL report. CIBIL is required when applying for a loan from a bank or other financial institution. It speeds up the loan processing process and helps to establish your creditworthiness. A user can view their CIBIL score and report by joining on their website. The CIBIL login and registration process is straightforward and requires only a few pieces of information.
Individuals and businesses alike can sign up with CIBIL to obtain their unique credit information.
Some misconceptions, myths and facts:
- A CIBIL score is solely determined by loan repayment history.
Fact: While loan repayment history is a significant aspect in generating the CIBIL score, several other variables are also considered. These factors include the length of the individual’s credit history and the number of recent credit inquiries.
- Income influences CIBIL score
Facts: The CIBIL score does not consider a person’s income. If a person’s repayment history is bad, even someone with a good income may wind up with a low CIBIL score. A low-income person, on the other hand, may have a good CIBIL score if their credit history is clean.
- Income has an impact on CIBIL score
Facts: The CIBIL score does not consider a person’s income. Even someone with a high income may have a low CIBIL score if their repayment history is poor. A low-income individual may have a good CIBIL score provided their credit history is clean.
- Checking CIBIL Records Has an Impact on Score
Facts: Checking one’s own CIBIL score or record, whether once or many times, has no effect on the score. However, if multiple lenders access the person’s CIBIL record in a short period of time, the score may drop a few notches. In fact, it is a good idea to verify your CIBIL score on a regular basis to ensure that it is correct.
- Low CIBIL score is bad
Fact: A low CIBIL score is not always a bad thing, even if it can pose problems when applying for a loan or credit card. For example, if you have no credit history and a low CIBIL score, this can indicate that you are debt-free and financially responsible. Lenders may also consider other factors such as income and security offered before approving a loan.
- Getting a new credit card has an impact on your CIBIL score:
Fact: Your credit card repayment history is one of the most important variables determining your CIBIL score. Obtaining a new credit card, on the other hand, is not detrimental to one’s CIBIL score. However, if you make many credit card inquiries with multiple lenders in a short period of time, it may have an impact on your CIBIL score.
- A poor grade cannot be improved:
Fact: There are several strategies to improve your CIBIL score, including paying off all credit card debts, increasing your credit mix, and lowering your credit card utilisation ratio. Fewer inquiries about new loans and credit cards also contribute to a higher CIBIL score. In certain circumstances, the improvement may be gradual.
A good CIBIL score tells a lender that the borrower is financially responsible and has repaid earlier loans on time, in full, and with interest, as well as having a consistent stream of income from a business or work.
A low CIBIL score, on the other hand, shows that the borrower is a high-risk customer who has a history of making late payments or defaulting on debt. It implies that the borrower is highly likely to default on the loan due to the probability that their financial status and income are unstable.
However, as previously said, there are numerous myths surrounding the CIBIL score. For customers with high CIBIL scores, IIFL Finance offers a variety of loans, including gold loans, personal loans, and business loans, with competitive interest rates and flexible payback options. IIFL Finance offers a completely online loan application process and speedy disbursement to make the entire process as simple as possible.