Demystifying popular credit score myths

Often, while applying for a loan, we are clueless about what our credit history is all about. The typical jargons used for credit score such as CIBIL report and CIBIL TransUnion Score unnerve us and we often end up feeling confused by the end of the loan application.

Harshala Chandorkar, senior vice-president, Consumer Services and Communications, CIBIL tells BI India readers some of the common myths about credit score.

CIBIL decides the cut-off score for credit institutions

CIBIL does not recommend any cut-off score to banks to help them arrive at any lending decisions. Each bank has a different risk appetite and they decide what the cut off score should be for their bank. What may be a good credit score for Bank A may or may not be a good credit score for Bank B.

In addition to a good credit score, credit institutions may also consider other critical factors like your income to debt ratio, your residential status, professional qualifications, etc., while deciding on your loan application. Therefore along with a good credit score you must also ensure that all these factors are well placed before applying for the loan.

Only banks and credit institutions can access an individual’s CIBIL Report and CIBIL TransUnion Score

Consumers can directly access their own CIBIL Report and CIBIL Transunion Score on CIBIL’s website in three easy steps. A user will have to fill up an online form and make a payment through net banking, debit, credit or cash card. The final step would require online authentication based on the user’s credit history.

If you are successfully authenticated, your CIBIL Report and CIBIL TransUnion Score will appear on the screen and you shall also receive it via e-mail. If you fail the authentication, then you can upload a scanned copy of your identity proof and address proof on CIBIL’s website. The report will then get delivered to you via express delivery.

A poor score will haunt the borrower forever

An individual with a low credit score can gradually work towards improving it. Credit report and credit scores are dynamic and change according to the credit behavior of the borrower. Once the borrower has paid all the unpaid EMIs and has again started regularly paying the installments on the loan, his credit report will improve and reflect the regular payments accordingly. The credit score may also improve gradually.