The Top 5 CIBIL & Credit Score Myths Debunked
Your credit score is arguably a three-digit number that dictates your financial destiny. It determines whether you get the apartment, what interest rate you pay on your car, and whether a bank will approve your mortgage.
Yet, despite its importance, the way credit scores (like FICO or CIBIL) are calculated remains shrouded in mystery for most people. This lack of transparency has led to the rapid spread of dangerous myths.
Let's debunk the top 5 credit score myths that might be costing you money.
Myth 1: Checking Your Own Credit Score Lowers It
This is the most common myth, and it prevents people from monitoring their financial health.
There are two types of "credit inquiries":
- Hard Inquiry: This happens when a lender (a bank, an auto dealership) pulls your credit report because you applied for new credit. Hard inquiries do lower your score temporarily by a few points.
- Soft Inquiry: This happens when you check your own score via an app, or when a credit card company checks it to "pre-approve" you for an offer.
The Truth: Checking your own credit score is a soft inquiry. It has absolutely zero impact on your score. You can check it every day if you want to!
Myth 2: Carrying a Small Balance Improves Your Score
Some people falsely believe that if they pay off their credit card entirely, the bank will think they aren't using credit, and their score will drop. So, they leave a $50 balance and pay interest on it.
The Truth: You NEVER need to pay interest to build credit. Credit bureaus only care that you pay your statement balance on time. If you spend $500, wait for the statement to generate, and then pay the full $500 before the due date, it is reported as a perfect, on-time payment. Leaving a balance just gives the bank free money.
Myth 3: Closing Old Credit Cards Boosts Your Score
You finally paid off that terrible high-interest credit card you got in college! Naturally, you want to call the bank and cancel the card immediately to clean up your finances.
The Truth: Closing an old credit card almost always hurts your credit score for two reasons.
- Credit Age: 15% of your score is based on the average age of your accounts. Closing your oldest card shrinks that average age significantly.
- Credit Utilization: Closing a card reduces your total available credit limit. If your total limit drops from $15,000 to $5,000, but your other spending remains the same, your utilization percentage shoots up, tanking your score. Fix: If the card has no annual fee, cut the physical plastic card with scissors, but leave the account open!
Myth 4: A Better Salary Means a Better Credit Score
You just got a massive promotion and doubled your salary. Your credit score should skyrocket, right?
The Truth: Credit bureaus have no idea how much money you make. Your income, bank account balance, and net worth are completely invisible on your credit report. A millionaire who frequently forgets to pay their bills will have a much worse credit score than a barista who pays their $200 credit card bill exactly on time every month.
Myth 5: Married Couples Share a Joint Credit Score
When you get married, you share a house, a last name, and bank accounts. Do you share a credit score?
The Truth: There is no such thing as a "joint credit score." You and your spouse will always maintain separate credit reports linked to your individual Social Security Numbers (or equivalent national ID). However, if you open a joint loan (like a mortgage) together, that specific loan will appear on both of your individual reports. If one person misses the mortgage payment, both individual scores will drop.
By understanding how credit actually works, you can protect your score and secure the lowest possible interest rates when using our Loan Eligibility Calculator.