A Comprehensive list of Biggest Credit Score Myths
Maintaining a healthy credit score is crucial for good personal finance. However, a large number of people are deluded by popular misconceptions that have been floating around for years. The top ones are as follows:
- The Only Credit Score that Matters is your CIBIL Score:
Most people know credit score as CIBIL score. This is because CIBIL is one of the oldest credit bureaus in India and also one of the most preferred too. However, there are many other popular and highly reputed credit agencies such as Equifax, High Mark, Experian, etc. These are also partners with many financial institutions and traditional banks and also offer credit score.
So, while CIBIL is important, so is the one provided by other top agencies. What actually matters is which agency is a partner with your bank.
- Closing a Credit Card Improves Credit Score:
It’s natural for an individual to panic when they find out that their credit score is poor. So, a lot of times, people in such situations end up taking wrong moves, one of which is closing their credit cards.
Closing a credit card usually doesn’t help much. If anything, it can drop your score even further. This is because old credit card accounts are highly beneficial for your score. Additionally, by reducing the number of credit cards you have you increase the possibility of a high credit utilization, which is detrimental to your credit score.
- You Can Fix Your Debt-Problem by Opting for Settlement:
When a loan borrower is unable to repay a loan, and has been delaying the EMIs for a long time, when a bank may offer to settle the case for an amount lower than the actual pending debt through a process called “settlement”.
In most circumstances, “settlement” is not recommended. This is because it can badly damage your report. Moreover, the debt doesn’t actually go away from the credit report. So, every time you will apply for a loan, the lender will find out about it and immediately reject the application.