Despite the fact that credit scores are becoming increasingly important, many consumers continue to have many misconceptions about them because of a general lack of awareness regarding credit reports and credit scores. Many of these myth believers are not familiar with the concept of a CIBIL score. Other common misconceptions that you should avoid believing in include those that getting a credit report will lower your score, checking your credit report is only advised when applying for credit cards or loans, closing old credit cards will raise your score, and avoiding loans will show high creditworthiness can be harmful to your finances.
Avoiding these fallacies and forming healthy habits like paying your credit card bills and loan EMIs on time, having a credit mix that is balanced, and keeping your credit utilisation ratio under 30% are more important than ever. This is due to the growing significance and importance of understanding and also doing CIBIL score check free online by pan number every month.
You risk having your request for a copy of your credit report rejected.
The lender will ask one or more credit agencies for a copy of your credit report when you apply for a loan or credit card. Knowing whether your score is at the lower or upper end of the credit score range can help them make a more accurate judgement of your credibility.
Your credit score is reduced by a few points for each hard inquiry, which is a request for your credit report made by a lender and recorded in your credit report. Soft inquiries can be made through online financial platforms or straight from credit agency websites. Soft inquiries are independent and have no impact on your credit score. To understand more about credit scores, obtain a free credit report, and find the best loan and credit card offers depending on your income, credit score, and other qualifying requirements, it is advised to try visiting online financial portals.
Monitoring credit ratings is only necessary for those who are asking for loans and credit cards.
Any mistakes or omissions could have a negative impact on your credit score because your credit report’s data is utilised to calculate your credit score within the credit score range. It’s a good idea to develop the practise of routinely CIBIL score check free online by pan number
to avoid such inaccuracies or even potential frauds from going unnoticed and harming your credit score.
Regularly reading your credit report will allow you to understand what a credit score is and identify any inaccuracies as soon as they are discovered.
At least once a year, you should request a free credit report from each of the four main credit reporting agencies. Visit online financial portals to get free credit reports, frequent updates on your credit history, and details on where your credit score sits between 300 and 900.
If you cancel unused credit cards, your credit score will rise.
Most credit card users believe that deleting their present cards will improve their credit score. However, doing so can lower your credit score in addition to the two previously listed causes. First and foremost, it reduces your overall credit limit, which increases your credit utilisation ratio (CUR) if you continue to use your credit card at the same pace.
If your credit utilisation rate (CUR) is greater than 30%, which lenders may interpret as an indication of credit hungriness, credit agencies may lower your credit score by a few points. As a result, your chances of getting a credit score at the lower end of the range are higher. The second effect of cancelling expired credit cards is that it will shorten the average age of your credit history. Your credit score may suffer if the average age of your credit history decreases, which could make it more challenging for you to obtain credit in the future. This is accurate because the average age or duration of your credit history is one of the variables considered to determine your credit score. You can also track the changes in credit score through monthly CIBIL score check free online by pan number.
Absence of a credit history indicates greater creditworthiness.
Another prevalent misconception concerning credit scores is that avoiding all forms of credit, such as loans and credit cards, demonstrates one’s increased creditworthiness. In actuality, establishing credit is difficult, and not using credit will result in a low credit score. Since they cannot tell how you have managed credit in the past without a credit history, lenders find it difficult to assess your trustworthiness.
This causes these first-time credit seekers to be categorised by lenders as high-risk, which could diminish their chances of obtaining credit or a loan in the future. Candidates who apply with bad credit, no credit, or who don’t understand the notion of a CIBIL score usually get an unpleasant shock when they learn their score and are either outright refused or charged greater interest rates than those with excellent credit.
Credit scores are unaffected by guaranteeing or co-signing loan agreements.
You are equally and severally accountable for the prompt payment of the related obligation if you co-sign or serve as a guarantee on a loan. Similarly, if the primary borrower exhibits unpredictable loan repayment behaviour, makes any late payments, or defaults, these actions are also recorded to credit bureaus and may later have a negative influence on both your credit score and the credit score of the primary borrower. Keep track of the loan payments on the account for which you have co-signed or provided a guarantee to ensure that the EMIs are paid on time. Ensure CIBIL score check free online by pan number so that if remains at the higher end of the credit score range. Moreover, to avoid this stress of seeing your guaranteed loan default due to irregularities in repayments, its better to do proper enquiry before co-signing/guaranteeing a loan to anyone. After all, its better to be safe than sorry!