Common Misconceptions About CIBIL Score And The Facts Behind Them

When we talk about credit scores, there are many myths associated with them. Here are the top facts & misconceptions about cibil score!

12 Jan,2023 08:52 IST 1692
Common Misconceptions About CIBIL Score And The Facts Behind Them

The CIBIL score, or the credit score, is a key parameter that determines a prospective borrower’s eligibility for any loan, whether secured or unsecured. The three-digit CIBIL score falls between 300 and 900. It is calculated using various inputs, including the credit history of an individual and amount that the person may have in open loans.

However, there are many myths attached to the CIBIL score and how it is calculated. Let us look at some of the common misconceptions about the CIBIL score and the facts behind them.

• Misconception: Income Helps Determine CIBIL Score

Fact: A person’s income does not get reflected in the CIBIL score. A person with high income may end up with a low CIBIL score if the repayment history is poor. Conversely, a low-income person may have a high CIBIL score if the credit history is clean.

• Misconception: CIBIL Score Is Calculated Solely By Loan Repayment History

Fact: While the loan repayment history plays an important role in determining the CIBIL score, there are several other factors that are also taken into account. These include length of the person’s credit history and number of recent credit enquiries.

• Misconceptions: Debit Card Transactions Impact CIBIL Score

Fact: The number of debit cards a person has or transactions through them are directly linked to the bank account. These transactions have no bearing on the CIBIL score as there is no credit involved.

• Misconception: Checking CIBIL Records Affects Score

Fact: An individual checking own CIBIL score or record, whether once or many times, does not impact the score. However, if many lenders are accessing the person’s CIBIL record in a short span of time, it may lower the score by a few notches. In fact, it is a good idea to frequently check your CIBIL score to make sure it is accurate.

• Misconception: A Low CIBIL Score Is Bad

Fact: A low CIBIL score is not always a bad thing, even though it can cause issues when applying for a loan or credit card. For instance, if you have no credit history and a low CIBIL score, this can be a sign that you are a debt-free person who is financially responsible. Also, lenders may look at many other aspects such as income and security provided before advancing a loan.

• Misconception: Closing A Loan Erases Bad Repayment History

Fact: The repayment history for a particular debt will have a bearing on the CIBIL score for a long time, even if you were to close or settle the loan account. A similar misconception is that if you return a credit card where you missed repayment, it will immediately restore your CIBIL score. That repayment history stays on the CIBIL score for a long time.

• Misconception: Taking New Credit Card Impacts CIBIL Score

Fact: The credit card repayment history is one of the important factors that determine your CIBIL score. But taking a new credit card in itself is not bad for the CIBIL score. However, if you make multiple enquires for credit cards with many lenders in a short span of time, it may reflect on the CIBIL score.

• Misconception: A Bad Score Can’t Be Improved

Fact: There are a number of ways to increase the CIBIL score including clearing all dues on credit cards, improving the credit mix and lowering the credit utilisation ratio of credit cards. Fewer enquiries about new loans and credit cards also help increase the CIBIL score. The improvement may be gradual in some cases but it can definitely be increased.


A high CIBIL score assures a lender that the borrower is financially responsible and has repaid prior loans on time, in full, and with interest, in addition to having a reliable source of income from a business or job.

On the other side, a low CIBIL score essentially indicates that the borrower is a high-risk customer who has a history of making late payments on debt or of defaulting. It suggests there is a strong likelihood that the borrower would default on the loan due to the possibility that their financial situation and income are unstable.

But there are many misconceptions attached with the CIBIL score as listed above. For borrowers with strong CIBIL scores, IIFL Finance offers different kinds of loans—gold loans, personal loans and business loans—at the best possible interest rates in the market and customized repayment terms. IIFL Finance uses a fully online loan application method and quick disbursal to make the entire process hassle-free.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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