You’ve completed one of the biggest milestones a homeowner can accomplish: paying off your mortgage – Congrats! With this, a new sense of relief can occur but the prominent question that many have still lingers, how does this affect my credit score?
The answer is somewhat specific to each individual, but for many, your credit will more than likely see little to no change.
What happens to my credit score?
In most cases, paying off a mortgage won’t hurt nor will it help your credit score in the long run.
If your mortgage was your only installment loan, chances are your score might drop slightly.
Past financial behaviors also have an impact on one’s credit dropping from paying off a mortgage. Having a good history of on-time payments could offset this drop and even out your credit.
If by chance, you do notice a considerable drop in your credit score following the closure of your mortgage payments, chances are they are caused by another factor besides your mortgage. This could be due to a large amount of spending in another area as funds becoming more available when your mortgage was freed. Other circumstances such as opening credit cards or late payments will also have a negative effect on your credit as well.
After paying off your mortgage, that information, however, just doesn’t disappear from your credit report completely. According to Equifax, loan information from your mortgage can stay on your report for as long as 10 years from your last payment.
My mortgage is paid off, what now?
Although your credit score won’t be seriously altered due to a mortgage being paid off, there are many great benefits to checking off paying that large sum each month. The effect your credit score might have should not be your number one determining factor, but it also shouldn’t keep you from doing so either.
Paying off your mortgage is something to be proud of and a goal for many homeowners today.
Not looking for a mortgage yourself, but know someone who is? Have them get into contact with us today!