Myth vs. Fact: CIBIL Edition

Since your CIBIL Score and Report play such a crucial role in your loan application, it's important to understand how they work. Read on to see 4 of the most common misconceptions borrowers have about their CIBIL Score and CIBIL Report and debunk common myths!


Myth: CIBIL maintains a record of defaulters.

Fact: While defaults on credit are recorded in your CIBIL Report and negatively affect your CIBIL Score too, CIBIL does not maintain a list of defaulters that are not allowed to receive loans. What this means is that a borrower with a past default can bounce back with a good CIBIL Score and receive loans.


Myth: Assets and Investments affect the CIBIL Score:

Fact: The CIBIL Score is calculated on the basis of loans and credit cards. Details regarding one’s savings, investments, and current account do not play a role in the calculation of the CIBIL Score. Hence, a low bank balance or bounced cheque will not reduce your CIBIL Score.


Myth: No Credit History is the Best for a Loan Application.

Fact: The CIBIL Score takes into account the duration of credit history when calculated. While many people think that no credit history is the best for a loan application, lenders are truly looking for responsible borrowers that have taken credit in the past and returned ineffectively. Hence, a good credit history is better than no history at all.


Myth: If I Have a Good CIBIL Score I Can Get a Loan from Anywhere.

Fact: Having a good CIBIL Score greatly increases your chances of getting a loan application approved, but it does not guarantee that you can receive any loan you apply for. Various factors such as income, KYC, loan amount, and collateral/security are considered while granting a loan.


So basically...

The CIBIL Score and Report are important components of your loan application to financial institutions and banks. They aren’t merely meant to help institutions decide your creditworthiness but also bring about discipline amongst borrowers in the country. Hence, it is important to be responsible with credit and understand how CIBIL functions.