In today’s world, your credit score decides whether a bank or lender will give you a loan or not. From personal loans to home loans, your score plays a major role in your approval chances and even the interest rate you’ll get.
While many people have heard about the CIBIL score, few truly understand how it works. And because of that, many fall for myths that end up damaging their score. A small mistake or a misunderstanding can make you ineligible for a loan. Even if your salary is high, lenders may still reject your application if your credit score looks risky.
Here are five common credit score myths that can silently harm your financial future.
1. High Income Means High Credit Score – A False Belief
One of the most popular myths is that if you earn more, your credit score will automatically be high. But your income and credit score are two completely different things.
Lenders do check your income to know if you can repay the loan, but your credit score depends more on:
- Your past loan repayment history
- The number and types of loans (credit mix)
- Your credit utilisation ratio
- Any delays or defaults on EMIs or credit cards
Even if you earn ₹1 lakh per month, if you miss credit card payments or use too much of your limit, your credit score can drop fast. So, never assume your salary will protect your score.
2. Checking Your Score Hurts It – Not True
Some people avoid checking their credit score because they believe it will lower their score. This is completely false.
There are two types of credit score checks:
- Soft Inquiry: When you check your credit report. It doesn’t affect your score.
- Hard Inquiry: When a bank or lender checks your score while processing a loan or credit card request. Multiple hard inquiries in a short time can slightly reduce your score.
So, feel free to check your score regularly to stay updated. It’s a good habit and helps you fix any errors early.
3. Closing Old Credit Cards Boosts Your Score – Actually, It Reduces It
Many people think that closing an old or unused credit card improves their credit health. But the truth is the opposite.
When you close a card, your overall credit limit goes down. So, even if your spending remains the same, your credit utilisation ratio (amount used vs total limit) increases. A higher ratio negatively affects your score.
Also, an old credit card adds to your credit history length. Keeping it open helps build your credit reputation. So, if a card has no annual fee and isn’t causing any issues, it’s smarter to keep it.
4. Prepaying Your Loan Boosts Your Score Instantly – Not Always
Repaying a loan early sounds like a good thing—and in many cases, it is. But when it comes to your credit score, prepayment doesn’t always give a boost.
Your credit score reflects how well you manage credit over time. Paying EMIs consistently and on time shows lenders that you’re responsible. If you prepay a loan too quickly, you reduce your credit history length.
Also, some lenders may charge a penalty for early closure. So, it’s important to think before using bonuses or savings to pay off the loan early, especially if it’s your only active loan.
5. CIBIL Score and Credit Score Are the Same – They’re Not
This is a very common confusion. People think that the CIBIL score is the only credit score. But in reality, CIBIL is just one of the many credit bureaus in India.
Your credit score can come from different agencies like:
- CIBIL (TransUnion)
- Experian
- Equifax
- CRIF High Mark
All of them provide scores based on your credit activity. Lenders may use any of these depending on their tie-ups. So don’t think only your CIBIL score matters. Make sure your data is accurate across all bureaus.
Why It’s Important to Know the Truth
In today’s digital lending world, banks and apps use automated systems. These systems immediately reject a loan application if the score is low. Even if the loan is approved, a poor credit score can mean higher interest rates and fewer offers.
So, believing in these myths can make you pay more for the same loan—or worse, not get one at all.
Always stay informed. Your credit score is your financial identity. Handle it with care, track it regularly, and avoid following random advice or myths without checking the facts.
