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Business News/ Money / CIBIL: How to improve your credit score with a mortgage loan?
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CIBIL: How to improve your credit score with a mortgage loan?

Making regular mortgage payments demonstrates to credit bureaus that you are a responsible borrower. This positive payment history can have a significant impact on improving your credit score.

Missing mortgage payments or defaulting on the loan can severely damage your credit scorePremium
Missing mortgage payments or defaulting on the loan can severely damage your credit score

Taking a mortgage and managing it in a responsible way can improve your CIBIL score. By raising a home loan or taking a loan against a property, you can lengthen your credit history, which is an important factor in credit scoring models. 

And a longer credit history usually reflects positively on your creditworthiness.

This is how mortgage helps borrowers improve CIBIL score:

Payment history: Making regular mortgage payments shows to credit bureaus that you are a responsible borrower. This positive payment history can have a significant impact on improving your credit score.

Credit mix: Mortgage loans add diversity to your credit profile, which can positively impact your credit score. Banks like to see a mix of different types of credit, such as installment loans and credit card debt.

ALSO READ: CIBIL Score: Suspecting unauthorised inquiries on your credit report? 5 things you must do immediately

Credit utilisation: While a loan on property doesn't directly impact your credit utilisation ratio (which is the amount of credit you're using compared to your total credit limit), it can indirectly impact it by reducing the percentage of available credit you're using if you're consolidating debt or not using other forms of credit excessively.

Overall, responsibly managing a mortgage can be a positive factor in improving your credit score over time, but it's essential to make payments on time and manage all your credit obligations wisely.

Frequently Asked Questions:

If you are denied credit card or loan, what does it imply?

If you are often denied credit or offered unfavourable terms when applying for loans or credit cards, it means your credit score is lower than you realise.

Does the collection notice impact the CIBIL score?

If you have started receiving collection notices or calls from debt collectors, it’s an indication that you have unpaid debts that have been sent to collections. 

This can significantly damage your credit score and make it challenging to obtain credit in the future.

ALSO READ: CIBIL: Does joint loan account impact your credit score?

How can you improve your credit score?

You can work on improving your credit score by making timely payments, reducing outstanding debt, and maintaining a healthy credit utilisation ratio (CUR) before applying for a loan.

Can you get car loan approved at credit score lower than 700?

If your credit score is lower than 700, you may still be able to qualify for a car loan, but you will in that case face higher interest rates or stricter loan terms. 

ALSO READ: 4 ways in which credit score affects your rental applications

Does checking your credit report impact your credit score?

A short answer is, it does not. In fact, it is advisable to keep checking the score from time to time for accuracy.

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Published: 25 Apr 2024, 02:24 PM IST
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