Equifax

Finance Blog

Does Paying Off My Mortgage Affect My Credit Score?

Written by Equifax Experts on April 28, 2014 in Credit  |   No 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.

No comments yet


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Credit Archive

Stay Informed Sign up for our FREE Equifax email Newsletter