Common Myths About Personal Loans for Low CIBIL Scores

Many people believe that a low credit score shuts every door to borrowing, but that is not entirely true. Personal loans are still possible if you understand how credit works and avoid falling for myths that harm your financial decisions. For instance, some assume that checking their own CIBIL score lowers it, or that income size alone decides loan eligibility.

Misconceptions like these can create unnecessary fear when applying for a 20000 personal loan or even a personal loan for CIBIL score of 550. Let’s uncover common myths and share practical insights that can guide borrowers wisely.

10 Common Myths People Get Wrong About Low CIBIL and Personal Loans

Applying for a personal loan for CIBIL score of 550 often creates confusion among borrowers. Many assume that such a low score completely blocks their chances of getting approved, especially when it comes to smaller amounts like a ₹20,000 personal loan. In reality, several lenders provide options even with a low credit score, but due to lack of awareness, borrowers fall for 10 common myths about eligibility, interest rates, and approval timelines.

➤ Myth 1: Checking Your Own Cibil Score Reduces It

Fact: Checking your own score is considered a soft inquiry, and it does not affect your credit profile. Only hard inquiries made by lenders during an application reduce your score.

Pro Tip: Review your credit report at least twice a year. It helps you track progress, find errors, and take corrective action early.

➤ Myth 2: Closing Old Credit Cards Improves Your Score

Fact: Older cards build your credit history. Closing them shortens your credit age, which can lower your score instead of raising it.

Instead: Keep old cards active with zero or minimal balance. Only consider closure if the annual fee outweighs the benefit of maintaining them.

➤ Myth 3: Higher Income Equals Higher Score

Fact: Income is not part of your CIBIL calculation. What matters is repayment behavior. A person earning ₹20,000 monthly but paying on time can maintain a strong score, while a high earner missing EMIs can still end up with poor credit.

➤ Myth 4: Defaulting Once Won’t Matter

Fact: Even a single missed EMI or delayed payment is recorded and can lower your score significantly, especially if it involves unsecured credit such as a personal loan. Consistency in repayment is crucial for maintaining healthy credit and future approvals at competitive rates.

➤ Myth 5: Using Your Full Credit Limit Improves Your Score

Fact: High utilization of 80–100% signals stress and lowers your score.

Tip: Keep your utilization below 30% of your total limit. This indicates responsible credit use and helps maintain stability in your report.

➤ Myth 6: Paying Minimum Due Is Enough

Fact: Paying only the minimum on a credit card creates rolling balances with interest charges that may exceed 30–40% annually. It also reflects poor financial health.

Better: Always pay the full outstanding amount to avoid unnecessary costs and negative impressions on your credit profile.

➤ Myth 7: Settling A Loan Clears Your Record

Fact: Settlements are marked as “settled” in your report, which hurts your credit history for up to seven years.

Better: Negotiate a restructure instead of settlement. A restructured loan shows more positively than a partially paid and closed account.

➤ Myth 8: Cibil Score Updates Instantly

Fact: Reports update monthly. Even after clearing dues, improvements may take 30–45 days to reflect.

Tip: Be patient and check whether your lender has reported the updates correctly to the credit bureau.

➤ Myth 9: All Loans Affect Your Score The Same Way

Fact: Different loans weigh differently. Unsecured loans like personal loans carry higher risk in your profile, so timely repayments here matter more than secured loans. A healthy mix of credit types improves your overall score.

➤ Myth 10: You Can’t Get A Personal Loan Below 750

Fact: Having a high CIBIL score definitely improves your chances of getting lower interest rates, but a low score doesn’t mean you cannot borrow at all. Many lenders still consider applicants with a CIBIL score of 550 if their income is steady and documents are in order. In fact, several borrowers have been able to access small-ticket loans such as ₹5,000, ₹10,000, or ₹20,000 personal loans, and even larger amounts like a ₹50,000 personal loan through digital lending platforms.

Conclusion

Believing in myths about credit scores can stop people from exploring real opportunities, even for something as small as a 20000 personal loan. A low score doesn’t mean borrowing is impossible — it just means that repayment habits and financial discipline matter even more. By learning how CIBIL truly works, borrowers can avoid mistakes and steadily improve their credit profile. Whether it’s managing credit cards, keeping usage low, or paying EMIs on time, these habits often matter more than income. For those seeking quick and simple options, digital platforms like Zype have made access to ₹20,000 personal loans more achievable and responsible.

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