Credit Score: Top-5 myths debunked

A credit score has a significant role in your financial life. Maintaining a good credit score is extremely crucial as financial institutions such as banks, NBFCs, and credit card companies check your credit score before approving a loan or credit card application.

A credit score is a three-digit number that rates your creditworthiness. It acts as a parameter for lenders to decide a borrower’s repayment capacity. A credit score can fall between 300-900, depending upon the individual’s creditworthiness.  However, a credit score of 700 or above is generally considered as good.

Today, there exists a plethora of information on credit scores coming from various internet platforms and portals, thus giving a rise to confusion and myths. Due to this many false information about credit score keep spreading.

People find it difficult to verify the validity and applicability of these myths and rumors. So for your benefit, we have debunked the top 5 myths about credit score. Here it goes:

Myth 1: All credit bureaus show the same credit score:

This is not true as credit score differs with different credit bureaus. There are four credit bureaus in India – Experian, CRIF High Mark, TransUnion CIBIL, and Equifax.

Every bureau has its own proprietary algorithm and model to calculate the credit score. So, a borrower will have four different credit scores depending upon the bureau.

Myth 2: Checking my credit score regularly will lower it

This is the most common myth pertaining to credit score. The truth is you should be updated with your credit score and it’s fine to check once every 3-6 months. By keeping a check, you get a clear picture of your credit score and increase your chance to improve it.

However, frequent checking of your credit details within a short span of time by lenders could affect your score and give a wrong impression to the prospective lender.

Myth 3:  Credit score depends on your Income:

The scores are calculated only on the details found in your credit report and your report includes information about credit utilization and debt management. It does not include any information about your income.

If you earn Rs. 15 lakh annually but do not maintain timely payment of bills, EMI, etc. You will have a bad credit score. But if you earn just 7 lakh and maintain balance in your finances, you will have a good credit score.

Myth 4: Marriage merges your credit score:

It is often believed that after getting married, your credit score gets associated with your spouse’s score, but this is not true at all. Credit scores are calculated according to your creditworthiness as an individual. However, in the case of a joint loan, a delayed EMI payment or a default can impact scores of both the co-borrowers.

Myth 5: Debit cards can help build a credit score:

Your debit card is not a credit line, hence it does not affect your credit score or credit history. Purchasing anything via debit cards is just like paying in cash as you are not borrowing from a lender but only using the money that’s already in your bank account. This does not impact your credit score in any way.