Debunking Credit Score Myths
Don't fall for common credit score myths! Learn the truth about credit inquiries, debt impact, late payments, and more to better manage your financial profile.
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20,00,000+4.7/5₹3,200Cr+20,000+20,00,000+Key Takeaways
Credit score myths are widespread in India and lead to decisions that damage scores unnecessarily.
The most common myths involve checking your own score, income, old accounts, and what happens after loan closure.
Understanding how credit scores actually work is the single most effective way to protect and improve yours.
Your credit score is not permanent. It can always be improved with the right knowledge and the right habits.
FREED helps you understand your credit profile clearly and take the right actions, not the ones you heard from a friend.
Why Credit Score Myths Are Dangerous
Credit score myths are not harmless misunderstandings.
They lead people to take actions that actively damage their credit profiles. They stop people from taking actions that would genuinely help. They create fear around things that are completely safe. They create false confidence around things that are genuinely risky.
The result is a population of borrowers making decisions based on incorrect information, paying higher interest rates, getting loans rejected, and struggling to understand why their scores are not improving despite their best efforts.
In India, financial literacy around credit scores is still developing. Most people learn about credit scores only when they apply for a loan and get rejected or get a higher rate than expected. By then, the myth-driven decisions have already caused damage.
This article addresses the eight most common and most damaging credit score myths in India.
For each myth, we explain what people believe, what is actually true, and what the practical implication is for your financial decisions.
- 1
Myth 1: Checking Your Credit Score Lowers It
What people believe Many people in India actively avoid checking their credit score because they have heard that doing so will reduce it. Some go months or years without looking at their report out of this fear. The truth Checking your own credit score is a soft enquiry. Soft enquiries have absolutely zero impact on your credit score. Your score
- 2
Myth 2: A High Income Means a High Credit Score
What people believe Many people assume that earning a high salary automatically translates to a high credit score. Conversely, people with lower incomes sometimes assume they cannot have a good credit score. The truth Income is not a factor in your credit score calculation at all. Credit bureaus like CIBIL, Experian, Equifax, and CRIF High Mark do not have access
- 3
Myth 3: Closing Old Credit Cards Improves Your Score
What people believe Many people believe that closing unused or old credit cards is responsible financial behaviour that will improve their credit score. Some close old cards specifically because they think having fewer credit accounts makes them look less risky to lenders. The truth Closing old credit cards almost always hurts your credit score, not helps it. There are two
- 4
Myth 4: You Only Have One Credit Score
What people believe Most people refer to their credit score as a single number, often specifically the CIBIL score. Many believe there is one official credit score for each person in India. The truth You have multiple credit scores, not one. In India, there are four credit bureaus authorised by the RBI: CIBIL, Experian, Equifax, and CRIF High Mark. Each
- 5
Myth 5: Paying Off a Loan Always Immediately Improves Your Score
What people believe People believe that the moment they pay off a loan, their credit score will jump up immediately. Some people are surprised and disappointed when they pay off a loan and see little to no improvement, or even a small drop. The truth Paying off a loan is positive for your long-term financial health. But the immediate impact
- 6
Myth 6: A Zero Balance Credit Card Is Always Best for Your Score
What people believe Many people believe that keeping a credit card with a zero balance at all times is the ideal behaviour for maintaining a high credit score. Some people get a credit card and then never use it, believing this perfect inactivity will signal excellent creditworthiness. The truth A zero balance credit card is not ideal from a credit
- 7
Myth 7: Bad Credit Is Permanent
What people believe Many people with poor credit scores believe their situation is permanent or at least hopeless in the medium term. They assume that defaults, settlements, or poor payment history have permanently closed the door on good credit. This belief stops them from taking the steps that would actually improve their score. The truth Bad credit is not permanent.
- 8
Myth 8: You Do Not Need a Credit Score If You Do Not Want Loans
What people believe Some people, particularly those who prefer to avoid debt entirely, believe that having no credit history or a poor credit score is irrelevant as long as they do not plan to take a loan. The truth Your credit score has implications beyond loan approvals. Employers in the banking, finance, and senior management sectors increasingly check credit reports
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About FREED
FREED is India's most trusted debt relief and resolution platform.
We believe that financial myths cause real harm to real people. When someone avoids checking their credit score out of unfounded fear, or closes an old credit card thinking it will help, or gives up on rebuilding their credit because they think the damage is permanent, they are making decisions based on wrong information.
FREED exists partly to replace wrong information with accurate, plain-language guidance.
Every day, our experts help people across India understand their actual credit situation, separate fact from myth, and take the specific actions that actually improve their financial health.
Whether you have a damaged score you want to rebuild, a decent score you want to protect, or simply a lot of unanswered questions about how credit scoring works, FREED is here to help.
Talk to a FREED Expert Today. Completely Free.
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FREED is India's leading platform for debt settlement and financial wellness. We have helped over 60,000 Indians reduce, manage, and get completely out of debt the right and legal way.
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