Does Paying Off Only The Interest of Your Mortgage Affect Your Credit Score?

The payment towards the mortgage is important for a borrower. This frees up the burden and leads to financial independence. It also leads to improvement in credit scores. People use various methods to pay off their debt, the most common being interest payment. They believe it is a sure way to improve their credit score, but that might not always be the case. 

Thus it is necessary to understand the best way to pay off the mortgage loan without affecting the credit score. Credit scores maintained by the Credit Information Bureau India Limited are the CIBIL score. Plenty of online free cibil score check apps are available to determine credit scores.

How does the Mortgage payoff work?

The total mortgage includes the principal amount and the interest incurred on it. Mostly all mortgages have a limit which first includes the interest payment and then the principal, which needs to be repaid. 

The banks make sure to have the minimum payment high enough that it includes at least some principal amount, which can help in the repayment of the debt in full in the future.

Does the mortgage affect your credit score?

The loan and the credit score inversely follow one another. If your credit score is high, your mortgage loan interest will be less and vice versa. This means that people with a high credit score greatly benefit when taking a mortgage loan in the form of interest payments. 

According to the general guidelines, a credit or a CIBIL score of 740+ is enough to qualify you for the mortgage loan. Again there is a free Cibil score available to check and determine if you qualify or not. Borrowers can download CIBIL Score App or use the website to ascertain their scores.

How is credit score related to mortgage payoff?

Borrowers should understand that paying off just the mortgage loan will not vastly improve their credit scores. Paying just the interest rate will not affect the score. That is, it won’t increase or decrease. This is simply because the principal amount remains the same no matter how much interest has been paid. 

The credit rating system will detect that the repayment of the principal is not happening to the extent it should be, and it is never a good thing for the borrower. This is the same as if somebody has a credit card and they have used it to its limit, which is never a good thing for the credit score.

Improvements to make in Credit score despite having a mortgage loan

  • As simple as it may sound, a way to improve the credit score while having a mortgage loan is to prepay the loan. The most significant advantage is that it offsets the principal amount and reduces the tenure of the loan over which the interest has to be paid. This solution might only be possible for some.
  • Another option to improve credit score while having a mortgage loan is an interest-only mortgage loan. Some financial institutions offer a way to pay only the interest for a fixed period when you take the loan. It helps the borrowers get a higher loan amount and also increases the borrowers’ eligibility by a significant degree. The risk is higher, and borrowers generally have to ensure cash resources they have is 10%-20% of the property value.

Thus the best way to improve the credit score is generally to prepay the principal amount and reduce the tenure of the loan.


Mortgage loans are an essential way to meet long-term financial goals. People often have trouble improving their credit scores after taking a loan. It is necessary to know that some important ways help to tackle this problem and let you increase the score in return. Borrowers can use the free Cibil score to determine where they stand. 

CIBIL Score App lets borrowers calculate their credit score without any hassle. Prepayment of the mortgage loan and getting an interest-only mortgage loan are some ways that borrowers may use to ensure good credit scores and find financial freedom.

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