The document discusses 5 common myths about credit scores in India and provides facts to debunk each one. Specifically, it notes that building credit regularly through on-time payments can improve one's score, that annual credit reports don't hurt scores, that closing old accounts can reduce available credit and lower scores, that a mix of secured and unsecured loans is best, and that being a guarantor on a loan does impact one's liability and score.

1. 5 Myths and Facts about
Credit Scores

2. Myth #1
It is impossible to improve their credit score.
Fact
Build your credit by making payments regularly and
don’t delay any installment.

3. Myth #2
Frequent credit report verification can damage your
credit score.
Fact
As per RBI, each individual can get one credit
report for free every year from each of the 4
credit bureaus in India. It doesn’t damage your
credit score in any way.

4. Myth# 3
You may increase your credit score by closing old
accounts
Fact
Closing your old accounts reduces your available
credit. It increases the credit to debt ratio. If you have
outstanding balances on other cards, it can result in
decreasing your credit score.

5. Myth#4
High proportion of secured loans increases credit
score
Fact
Banks prefer to approve secured loans but, credit
bureaus work differently have a healthy mix of
secured and unsecured loans.

6. Myth# 5 –
Guarantee for loan doesn’t affect credit score
Fact
The liability of the guarantor is co-extensive with that
of the borrower. In case of default by the borrower,
the banks can demand the payment from the
guarantor.