Will I be denied loan because of poor Cibil score? Is having no Cibil score good for my financial health? Clear your doubts here about your credit score

As the population in India is moving largely to urban landscapes, more people are using credit line than ever. They use credit facilities such as home and personal loans, credit cards, and overdrafts to fulfil their short-, mid-, and long-term requirements. The trend is no different in Tier-II and Tier-III cities, where people are gradually moving towards accessing a credit line. But how do credit facilitators gauge a would-be borrower's credit health or his repayment capacity. The most popular way is to check the borrower's credit history, or Cibil score. A Cibil score of an individual tells about his past credit behaviour. It reveals whether they have been regular in their repayments or if they have been serial offenders.

Based on the Cibil score, the lender decides the terms and conditions of the credit facility.

Though people often hear about the Cibil score, they hardly know its meaning until they approach a lender to apply for a credit facility.

More often, their primary source of information about the Cibil score is their friends and relatives, who may themselves be ill-informed.

It results in creating myths surrounding the Cibil score.

People consider these myths to be realities and form their opinions about them based on half-baked information.

In this write-up, Anuj Sharma, Chief Operations Officer, IMGC, India's first mortgage guarantee company, speaks about common myths about the Cibil score and how to get rid of them.

Poor Cibil score means no loan

It does not necessarily mean that you cannot get a loan, but your risk of rejection goes up, which has a direct impact on the rate of interest you get in the market.

Cibil is the only source for getting credit score/report

It is one of the most prominent sources; there are other credit bureaus like Experian, Equifax, and CRIF high mark.

Getting married will merge your Cibil scores

Individual scores will continue to be maintained; there is no merging that happens; at the maximum, loans taken with your spouse jointly will reflect in both credit reports.

Anyone can check my Cibil score

Access is restricted and can only be accessed by you or by an entity to which you have given consent.

Bad credit score lasts forever

Negative information on your credit score doesn’t last a lifetime; if good credit habits are maintained, the score generally goes up.

Debit card builds a credit score

No, they have no impact on your credit score. For score, financial products that involve borrowing money have an impact.

Checking credit report hurts your Cibil score

This is a common misconception, but in reality, the impact on your score depends on two inquiries: Soft inquiries—where you check your own Cibil score or when credit assessments are done for pre-approved offers (from existing financiers)—do not impact credit scores.

Hard inquiry: Where you apply for a new credit loan/line, this has a direct impact on the score.

Frequent hard inquiries can categorise a borrower as credit hungry, which has a negative impact on the score.

Having zero credit is good

The situation cannot be termed good or bad; it may have a few implications, like access to financial products, a high interest rate, and lower terms.

Closing old accounts can boost your credit score

They may or may not have an impact; it completely depends on the credit line, repayment history, and length of the history. Managing credit responsibly is the key to managing the credit score.

High income boosts your Cibil score

It may not necessarily have a negative impact, but it can come at the cost of potential benefits that come with a good score.

It's better to start building early credit.