A Bounced Cheque Lowers Your Credit Score: 5 credit score myths you shouldn't believe at all
Credit Score Myths: When you apply for a loan, your credit score is one of the first things checked. Also known as the CIBIL score, this number ranges from 300 to 900 and reflects your creditworthiness. A higher score makes it easier to obtain loans with favorable interest rates. However, many people have misconceptions about credit scores. It’s important to understand the truth and dispel these myths.
No loan with a low credit score
Many people think that a low credit score means they cannot get a loan from the bank. This is not entirely true. While a low credit score can impact your credibility, banks also consider other factors such as your income. If you have a low credit score, you can still provide bank statements showing salary increases, annual bonuses, or other additional income sources to prove your ability to repay the loan. Even if this isn't possible, many banks and lending institutions offer loans to individuals with low CIBIL scores, albeit at higher interest rates. Additionally, if you can't secure a loan at the desired interest rate, you might consider applying for a joint loan.
Using fewer credit cards helps maintain a good credit score
It is commonly believed that using fewer credit cards helps maintain a good credit score. In reality, it is recommended to keep your credit utilization ratio below 30% of your credit limit to avoid appearing overly dependent on credit. However, if you exceed this 30% threshold but repay it on time, your credit score will not be negatively affected.
Checking your credit score frequently lowers it
Some people believe that repeatedly checking your credit score will lower it. This is not true. Checking your own credit score does not impact your credit report. Regularly monitoring your credit score is beneficial as it keeps you informed and allows you to take immediate action if your score drops.
A bounced cheque lowers your credit score
There is a misconception that a bounced cheque will lower your credit score. However, a bounced cheque does not directly affect your CIBIL score. Your CIBIL score is primarily influenced by your ability to repay loans on time. If a cheque bounces but you are consistently paying your loan installments on time, your credit score will not decrease.
Having too many credit cards can harm your credit score
Having multiple credit cards does not necessarily harm your credit score. In fact, many people use more than one card to increase their overall credit limit. As long as you use these cards responsibly and make timely repayments, your credit score will not be affected. Your CIBIL score only falls if you fail to make repayments on time.