A bad CIBIL score may prove as a nightmare for ones who have urgent requirement of money to meet certain needs and situations in which they are caught up sometimes such as debt repayment, medical emergencies or to meet some other needs which can only be attained by attaining loans. There are many ways with the borrower to get loans and the criteria to get these loan is based on the size of the loan but all the banks are compulsorily required to verify the CIBIL score of the applicants of all the financial products of credit, namely loans, and the credit cards. It is, however, a mandated guideline of the Reserve Bank of India that the banks are required to check the creditworthiness of the individuals. Therefore, if a person has poor a CIBIL score, it thus simply means that he is not creditworthy enough for the purpose of getting a loan from the conventional sources of finance because of their past actions.
But with some of the efforts, a person who has a bad CIBIL score can improve his rating and can again become creditworthy again. The article below tells us as to how mortgage helps us to improve the CIBIL score.
A mortgage indicates that you are credit responsible
The mortgage has a huge significance on your CIBIL score as it helps to indicates that the borrower has been responsible for his financial dealings so far. If a borrower maintains at least a score of 750 or above, such a person is considered fit to be conferred loan upon very easily.
A mortgage is a good debt
A mortgage is also considered as good debt because it is however tied to a physical asset. This is, however, opposite to the credit card debt or a personal loan which is unsecured and it does not have any asset backing in a physical form.
Your mortgage impacts your credit mix positively
Around 10% of the CIBIL score depends upon the account of the credit mix which the has. The credit mix refers to the types of credit which the borrower has availed of. If the borrower has a mortgage along with some other unsecured credit, it is thus indicative of the fact that the borrower has maintained a good credit mix. This, in turn, impacts the CIBIL score of the borrower positively.
Your CIBIL score increases over time on account of your mortgage
When the borrower makes repayments on time over a prolonged period, the CIBIL score of the borrower goes up gradually. This is because it exudes the dedication of the borrower towards timely repayments. So, service the home loan well in order to give a boost to the CIBIL score.
The negative impact that a mortgage may have
If there is a problem and things go awry due to which the borrower skips a repayment or two on the mortgage schedule, it can thus bring down the CIBIL score drastically and this is because a mortgage has the largest bearing on the CIBIL score. So the borrower should avoid landing in such a situation, it’s thus advisable for the borrower to maintain an emergency fund at all times. And he must ensure that the amount which is saved in this fund is sufficient to meet the regular expenses (including the mortgage) for at least the next three months.
Therefore, the borrower should ensure that you repays his mortgage on time and enjoys the benefits of a high CIBIL score throughout the loan tenure.