Busted! Top 3 credit score myths

Correct your friends the next time they try to scare you; offer them some tips on how they can improve their credit scores if they are poor borrowers

Illustration: Uttam Ghosh/Rediff.com

1. 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.

2. 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 3 easy steps:

Step 1: Fill online form- Visit www.cibil.com and duly fill in the online request form

Step 2: Payment – Make payment of Rs. 470 via Net banking / Debit / Credit / Cash Card

Step 3: Authentication – Online authentication based on your 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.

3. A poor score will haunt you 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 behaviour of the borrower. Once the borrower has paid all the unpaid EMIs and has again started regularly paying the installments on the loan, her/his credit report will improve and reflect the regular payments accordingly. The credit score may also improve gradually.

Here are some tips for the borrowers with low credit scores for improving their credit history and score:

• Pay all your outstanding loan and credit card dues
• Start paying all your EMIs regularly by the due date
• Review your credit history on a regular basis to check the improvement in your credit history and your CIBIL TransUnion Score
• And most importantly, do not apply for any more loans or credit cards till your credit history improves.

Harshala Chandorkar is Senior Vice President, Consumer Services & Communications, CIBIL