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Does Paying Off My Mortgage Affect My Credit Score?

Written by Equifax Experts on April 28, 2014 in Credit  |   29 comments

If you’ve recently paid off your mortgage, you’re probably feeling a huge sense of relief. It can be rewarding to pull a copy of your credit report after making that final payment and see that your home loan now shows a balance of zero. While…

information on my credit reportIf you’ve recently paid off your mortgage, you’re probably feeling a huge sense of relief. It can be rewarding to pull a copy of your credit report after making that final payment and see that your home loan now shows a balance of zero.

While you may be expecting a significant boost to your credit score as a result of paying down your mortgage, you’ll probably find that the three-digit score, which is used by lenders to assess your risk as a borrower, experiences minimal change.

The relationship between a paid-off mortgage and your credit score

Your credit score, which is calculated based on the information in your credit report, is a moving target. It changes constantly as lenders, collection agencies, and public records report new data that is then listed in your credit report. Your credit scores are updated each time there is a request for a score, and new information received impacts the model.

Additionally, each credit reporting agency has its own model for evaluating your information and assigning you a credit score, so your credit scores will likely vary between the agencies.

As a result, it’s difficult to determine exactly how one credit behavior or piece of credit activity affects your credit score. Taking out a mortgage can have a positive impact on your credit score because it builds up your mix of credit. However, paying off your mortgage won’t have a strong, positive impact, mainly because an installment loan—which is repaid over a designated period of time with a set number of scheduled payments—doesn’t lower your score to begin with.

This means that your credit score likely won’t experience huge gains when you finish paying off your loan, but you probably won’t see a noteworthy drop in points, either.

There’s a chance that if your mortgage is your only installment loan, paying it off could have a slight negative impact on your credit score, but the impact would likely be minor. If you consistently make your mortgage payments on time throughout the life of your loan, that positive payment behavior, which is the largest factor used to determine your credit score, could offset any credit score drop you may experience once you’ve paid it in full.

(Click here to learn how long information stays on your credit report.)

If you do notice a significant change to your credit score after you’ve paid off your mortgage, it could be the result of other credit activity that is listed on your credit report. If you’ve recently missed a payment, applied for new credit, or racked up high balances on your credit cards, for example, you may notice a drop in your score.

It’s important to remember that mortgages (and other installment loans) can help you improve your creditworthiness as long as you continue to make on-time payments. Making on-time payments on your credit cards, and keeping those balances low, could also help to boost your credit score over time.

Additionally, having your mortgage on your credit report, even after it’s been paid off, can help both your mix of credit and the length of your credit history. The loan could stay on your credit report and continue to factor into your credit score for up to 10 years from the date of last activity.

The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.


  1. Eric says:

    This shows that credit scoring agencies are nothing more than a scam to work against consumers. In order to obtain a mortgage you must go through a financial strip search and bring your credit score to a certain number level the lender approves you on. It seems as if you have a mortgage and work hard to pay it on time, then sell the property, there is no reward for your financial diligence. Does not sound fair to me because now your debt to income ratio is down. If you let the house go into foreclosure credit reporting agencies are quick to ding you one to two hundred points don’t they? I sold two rental properties after twelve years of paying a mortgage on them and not one point increase happened in my credit report; why? To me it makes more sense not use credit in the future and play their game, but rather pay cash and ignore such unfair scoring system that only seems to be geared towards hyping you for obtaining more major credit cards that we all do not really need in the first place for everyday shopping.

    • Dave says:

      You’re right. But the system keeps going because most people ‘can’t pay cash’. I’m 55, have paid off my house, and always payed my bills on time. My credit score is 40 points lower than my 20year old daughter who is in college, in debt, no job, and calls me for money every month. Her credit score is higher than mine! Ridiculous or what!

    • Rhonda S. says:

      You are right. It’s just a financial, game and it is unfortunate how they play with people’s lives. I am paying off my mortgage for my freedom. I’m going to continue to pay cash and live the life I want to live. I have 1 credit card, if I have to use it. But this is really a pathetic, game. You work so hard to keep your credit score as high as possible and there is no reward for it, except someone just always ready to get you into debt. What is the deal here?

    • Anonymous says:

      All the on time payments stay for 10 yrs!

    • Dale says:

      I do not expect my credit score to go up just because I paid off my house. The difference of 20 points makes no difference in my life after I pay off my mortgage. The only other loans I need are for cars and without my $3000 house payment I could pay off a car in one year so the rate wouldn’t matter.

      Lenders have the right to expect good credit when they are loaning people $10s of thousands of dollars. I sure wouldn’t loan someone $200k without knowing they will pay it back. I do not particularly like banks but without them 99% of us would never be able to buy a house or other large ticket items.

      • Analu says:

        You’re right. It is so nice of banks to let us borrow money so unselfishly! What would anyone do without banks and credit bureaus?

      • Bob says:

        You’re missing the point Dale. You may not mind having your score drop 20 points until you realize you can’t qualify for that 0% for 60 months rate on a new car because of it. Paying off your mortgage should not be something that causes a penalty.

    • Maggie s says:

      I have to agree. I registered an address change with one of my credit cards because I moved. As a result of a simple address change, my score dropped 7 points with one credit reporting agency. I have a credit monitoring service and it alerted me to this. It’s crazy.

  2. Sonya E. says:

    Credit reports are designed to keep people in debt. Nothing more nothing less. It is a scam and nobody can tell me differen

  3. Ray says:

    Cash is KING!

  4. Anonymous says:

    It’s totally rediculus! We had accumulated medical debt for something unforeseen and decided to pay the large amount off instead of filing bankruptcy. Thinking it was the right thing to do. We struggled for a few years just to pay it off and come to find out we would have been better off if we filed bankruptcy. A friend that ran up all kinds of credit cards and other debt that was for recreational fun filed bankruptcy less than two years and has a score in the 700’s. We paid everything off and have been consistent with our mortgage and bills for close to 2 years and my score is in the 500’s.

  5. Jeff says:

    Doesn’t matter if your mortgage is $10k or $500k….your on time payment or late payment is equal to a on time payment or late payment for your auto loan. Graded the same……same reason why a foreclosure on a $10k is no different than foreclosure on $500k.

  6. Janet says:

    A high credit score means one thing only; high debt!

    • Anonymous says:

      Absolutely untrue. I have a credit score well over 800 and have $2000 in debt with 30 times that amount in savings.

  7. MMiller says:

    I’ve been watching my credit score now for several years; desperately trying through unemployment and going back to school to keep my payments on time and increase my credit score. The highest score I’ve ever had in a fleeting moment was 771; less than a year later, due to the need to use credit cards more, it dipped to 719. I recently paid off my mortgage and all my credit cards and have been anticipating the rewards of all these years of fighting against the current to increase my score. So I’m waiting to see the results of reducing my debts and increasing my ratios! Hallelujah at last!! Then it hit me as I was reading all of your comments. Like a ton of bricks in the gut it hit me. The only reason anyone would work so hard for a great credit score is in the event one chooses to mortgage their future with current debt! Am I nuts? How self-deceived can I be? Maybe, just maybe I can justify a mortgage. But why do I need debt for anything else (other than God forbid unforeseen medical care). That’s it. As painful as it will be initially, I’m about to reduce my standard of living to as minimal as possible to crawl from under the mental bondages of debt that I’ve been a slave to and most Americans have been for several generations. I’m sure everything in me will convulse against this new lifestyle but I am determined to break free. Thank you all for your comments.

  8. Steve says:

    30 years ago I declared bankruptcy; my credit score tumbled and the ability for me to get a simple card, literally vanished. Slowly but surely I built this up to a 815.

    Life is good, I spoken with lenders and they basically tell me with an 800+ score I will not be denied much of anything (private jet perhaps 😉

    Even though I use credit sparingly if at all, it feels very good to know that if I ever have the need – I’m good. Hey, its worth the work and sometimes the sacrifices to hold a high number.

  9. Calvin T. says:

    This credit game does make you feel like you’re on a stationary bike ride. I found this site as I am contemplating the good and bad of paying off my mortgage early with some money I saved and don’t need for anything at the moment. Seems like a good idea to avoid that interest. I have credit cards that I use but do not allow to carry balances so they are helping my score and outside of a home, I don’t plan to borrow for anything else the rest of my life. Life doesn’t always go according to your plans though. I may work somewhere new and they will perform a credit check. The insurance companies check your credit score and a host of other entities with increasing frequency now a days do the same. I think I might just pay it down significantly to save on some of the interest.

  10. Dushi says:

    I’m in the same situation, PAY OFF OR NOT TO PAY OFF?
    It sure would just feel good to not have to deal with it and WOW I did it!
    But it sure seems like the interest I pay each month is paying for my credit points.
    I’m not sure if I will ever need to borrow a chunk of change again but would be real pissed off if I did and they would say my credit score is not high enough due to no dept?
    Again let’s reward the lazy people and punish the ones that actually pay off the loans. I think it would be a great thing for government instead to reward the people once paying off the home mtg by maybe no more taxes on there property or free home insurance or something?
    Yeah I know it’s a dream but…. Just needed to vent!

  11. Wayne says:

    I paid off my mortgage 2 months ago. My credit report last week showed that my score dropped 10 points. There were no other issues of any kind that would affect my credit score negatively. I have no car loan debt, student loan debt, credit card debt, nothing. This is stupid.

    • Vinny says:

      I paid my mortgage off in April 2015. From April until July my credit score remained unchanged. Then in August is started to drop. By December 2015 it had dropped 50 points from the score I had just prior to paying off the mortgage. No other factors have changed (same job, same salary, same spending profile).

  12. btaylo says:

    Paid off my mortgage expecting to see an improvement to my FICO score, a month later it went from 825 to 808.

  13. Jae C. says:

    I believe a mortgage payoff decreases score…if anything. The reason being that it’s a length of credit established factor that decreases. If you had a loan for 30 years and it closes, the average length of credit decreases.

  14. Dr. Ben L. says:

    I paid off my mortgage January 15, 2016 and my FICO score went from 872 to 836 in February and down to 817 in March. A total of 55 points. Which reading other comments on different sites is common. No other changes. 1 credit card that I pay off balance each month. Since 10% of the score is made up of Credit Mix and I now only have 1 credit type – credit cards – 1 that Ive had for 30 continuous years is the one I usually use and pay off every month, I’m assuming that was the reason. That part of the score is often referred to as the part of the score that tells banks how much money you are paying to Banking Industry. Right now I’m paying NOTHING. Not a penny in interest. So in revenge they lower my credit score. To truly be FAIR. The credit mix should be over the life of the persons credit history. I can only imagine what happens in 10 years when the mortgage goes off the FICO radar completely. My credit score will probably plunge again.

  15. Drew says:

    There is no reward for greater than a 750. The simple reason being default rates between 750 FICO and 850 FICO do not translate into predictable human behavior. Anything past 750 has no reward.

    Academics drive for perfect transcipts and brag about grades decades later. A credit score in top 20-30% is all you need. You were not down graded to a higher rate.

    You can up score by applying for more preapproved cards and nopt spending but that is not smart either.

  16. David says:

    What a minefield! Let practicality rule the day. If you want to pay off your mortgage and not pay the interest, then do it. Lower credit score, so what. Chances are that you have more money in the bank and don’t need the credit. Yes, like most of you, I have one credit card and pay it in full every month.

  17. Tim says:

    Your credit score is only important when you plan to borrow money. If you sell your house and don’t buy another with borrowed money then what is the problem? Saving on the mortgage should mean you can start to buy things upfront instead of borrowing.

  18. Louise says:

    I just pay cash and live my life.

  19. Colleen says:

    My husband & I busted our tails getting out of debt after our kids grew up and got out of college, married and settled into their own lives. We paid off our vehicles, credit cards and had only the house left to pay off. Then he got kidney cancer and thanks to the “Affordable Care Act” his cancer treatment wasn’t covered even though his premium had increased by $300/mo. Rather than becoming homeless or remortgaging our home, we decided to use a credit card to pay the bills. I have faithfully made payments of the minimum plus the interest every month. We have also paid off our home since because I went back to work despite my disability. Now I received notice that our credit score is low and because we have carried a high balance for 3 years on this card it is being cancelled! How does this make sense?

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