Gifted money does not impact your CIBIL score in a direct way. But it can, and does, affect the score positively in the following scenarios: you invest the gifted money into a scheme and improve your financial situation, use the gift received in cash to retire a debt, or use the same to give the down payment for buying an asset such as property or car.
In other words, using gifted money to improve your financial situation helps improve your credit score.
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Here, we explain how gifted money can affect your credit score:
Debt repayment: If you use gifted money to pay off debts, such as credit card balances or loans, it can positively affect your credit score by reducing your credit utilisation ratio and demonstrating responsible financial behaviour.
Increased savings: If you deposit gifted money into savings or investment accounts, it can improve your financial stability and potentially provide you with a financial cushion to manage unexpected expenses or emergencies.
While this doesn’t directly impact your credit score, it can indirectly contribute to better financial management, which can positively influence your creditworthiness over time.
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Down payment for loans: If you use gifted money as a down payment for a mortgage or another loan, it can affect your credit score indirectly by enabling you to secure financing for a large purchase. However, the impact on your credit score will depend on how you manage the loan payments going forward.
Conversely, if you receive gifted money and keep it in a savings account without using it to pay off debts or making significant purchases, it won’t have any direct impact on your credit score.
It’s important to note that gifted money itself doesn’t impact your credit score, but how you manage the money can affect your creditworthiness, and thereby your score.
Frequently Asked Questions:
How often should you check your credit score?
Most experts recommend to check the credit score at least once a year.
Can there be mistakes in credit reports?
It is not uncommon to spot mistakes on credit reports. So, regularly checking your credit score allows you to spot any errors, such as inaccuracies in personal information or incorrect reporting of accounts or payments.
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How can one maintain a healthy credit score?
In order to maintain a healthy credit score, one should make timely payments, maintain a diverse mix of credit accounts and keep debt levels manageable.
How is a credit score calculated?
This score is calculated based on your credit history, including your credit accounts, payment history, outstanding debts, length of credit history, and recent inquiries.
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Published: 06 May 2024, 11:16 AM IST