Knowledge about CIBIL score is critical for people with credit histories and also for those who have not applied for a credit so far. The CIBIL score is a 3-digit credit series given by the TransUnion CIBIL on the basis of past credit information of an individual. It ranges between 300 and 900. The closer your score is to ‘900’, the more convenient it will be for credit disbursal from the credit company.
A lot has been written about CIBIL score. Yet, there are some factors that most people don’t understand. Knowledge on the CIBIL score will go a long way in allowing you to understand it properly. In future, this means improving and maintaining it. Below are listed some facts about the CIBIL score that you really need to understand and keep your CIBIL score excellent constantly. Read on to clarify misconceptions on CIBIL score.
1. ‘CIBIL Score’ and ‘CIBIL Rank’ are different.
‘CIBIL Score’ and ‘CIBIL Rank’ are both valid terms that have come from the TransUnion CIBIL. However, ‘CIBIL score’ term is applicable to individuals. On the other hand, ‘CIBIL Rank’ term is applicable to companies. The ‘CIBIL Score’ ranges from 300 to 900. The closer score stays to 900, the higher will be your chances to get credit. The ‘CIBIL Rank’ ranges from 1 to 10. In case of enterprises, the closer your company’s CIBIL Rank is to 1, the higher will be the possibility that you will get a line of credit.
2. CIBIL score is not related to savings and investment account.
The CIBIL score is derived along the criteria of past and present credit related activity. Your CIBIL Credit Information Report encapsulates the summary of your previous and current credit accounts and related credit activities. However, it is not inclusive of information about other accounts like trading accounts, fixed deposit accounts, savings account, current accounts, or investment accounts.
3. CIBIL score and scores generated by other credit bureaus may differ.
Credit score delivered by TransUnion CIBIL and bureaus such as Experian, Equifax, etc. will not be the same even when there is similar credit information. This happens as every credit bureau uses their own scoring model to calculate and come to a conclusive credit score. Besides, your CIBIL score is different from credit scores of other credit bureaus because the data is updated from various lenders and filed with bureaus on different days.
4. CIBIL cannot directly edit/delete data from your credit report.
CIBIL delivers credit report based on the credit information received from the various credit sources. For instance, banks and NBFCs. They are not authorised to edit or delete your credit information directly. They can update your credit report but only when the changes are authorised and provided by the concerned financial institution.
5. Checking CIBIL score many times does not hurt your score.
When a person makes enquiry on his/her CIBIL score from credit bureaus or through authorised bodies, it makes for a soft enquiry. Soft enquires can be made innumerable times without impacting your CIBIL score. An individual’s score becomes negative as banks, credit card companies and various other creditors make a hard enquire about your credit report from credit bureaus.
6. A no credit history does not ensure a good CIBIL score. There is a misconception that if you don’t have a credit history, you will have a good CIBIL score. A person who has never taken a credit card or loans will never get their credit report or score from the CIBIL. This is also true for other credit bureaus as the bureaus dont get your credit data from lenders to generate credit report and calculate credit score.
7. CIBIL score is there even when you have not requested it.
There is a misconception that since a request for their CIBIL Credit Information Report has never been made, such a report is non-existent. However, that is not the case. Every 30 days, lenders like banks report credit information of all borrowers to credit bureaus. Hence, if you have a credit history, then you also have a credit score.
8. Shutting previous credit accounts does not raise your credit score.
Remember that shutting down your old credit accounts will not go towards raising your CIBIL score. If at all, doing so only has a negative impact your score. Individuals having a stable and long credit history goes to prove that they have managed their credit responsibly in the past. Therefore, lenders prefer lending money to people with old credit accounts to new credit accounts. The older your account, the better are your credit score, provided you handle your credit well.
9. Even when you pay timely EMIs, your credit score comes down when you apply for credit again and again.
While applying for a credit card or loan, lenders tend to make hard enquiries i.e., requesting for your credit report from credit bureaus to check your creditworthiness. Hard enquiries fair bad for your credit score, unlike a soft enquiry. This is why you should think before applying for multiple credit lines as hard enquiry using your name, means that your CIBIL score will go down by many points, despite timely repayments.
10. A free credit report from CIBIL is your right.
According to RBI’s directives, all Indian credit bureaus including TransUnion CIBIL are entitled to provide a full free credit report once in a year to all individuals whose credit information they hold. This way you are entitled to a free credit report from CIBIL every year. In case you need your report more than once, you must pay a small amount for it.
11. You may get a loan even if your CIBIL score is bad. A low CIBIL score is equivalent of no loan most of the time. However, different banks have different credit score cut-offs as per different types of loans. This means that despite a low CIBIL score, one can get rejected by lenders, and it does not mean that you won’t get a loan at all. So, at a low CIBIL score too, there are chances that a loan will be extended to you, but at a high interest rate.
12. There is no defaulter’s list with CIBIL.
There is a misconception that CIBIL and other credit bureaus have a list of defaulters. This is not true, CIBIL or no other credit bureau maintains a defaulter’s list. CIBIL and other credit bureaus can only gather information given by member credit bodies such as banks, financial institutions, etc.