Paying Off Your Mortgage Hurts Your Credit Score

by Michael on Nov 11, 2013 · 4 comments

Image of Falling Numbers

Would you be surprised if I told you that paying off your mortgage hurts your credit score?

Well, it’s true. I mentioned this in passing when talking about getting free access to your credit score from Barclaycard, but thought that it was worth a mention of it’s own…

For background, we paid off our mortgage a few years ago, near the beginning of 2010. Out of curiosity, I checked my credit score right before we made the payment and then watched to see what would happen to my score when the payoff hit my credit report.

Care to guess what happened? Sure enough, my score dropped 17 points the day the payoff showed up. There was no other activity on my credit report during that time, so I’m quite sure that the change was attributable to the mortgage payoff.

Yes, my score has recovered since then. That being said, the lack of installment loans is still listed as the #1 factor holding back my credit score. Oh well. My score is plenty high for my needs, so I don’t really care. And getting dinged for lack of a mortgage is certainly a good problem to have. 😉

If you’re curious about your credit score and don’t have (or want) an Barclaycard Arrival card, you can get a 10-day free trial of myFICO’s Score Watch. Just be sure to cancel before you get billed unless you want the service.


1 krantcents November 11, 2013 at 5:01 pm

I never worried about my FICO score! I just acted financially responsible and it takes care of itself.

2 Tie the Money Knot November 13, 2013 at 3:54 pm

Now that’s actually interesting, when you think about it! Funny how things work, with a credit score going down despite debt being eliminated. That being said, I’d rather eliminate the mortgage at the expense of a slight dip in credit rating 🙂

3 thepotatohead November 19, 2013 at 11:47 pm

That is pretty funny how that works. As long as you stay above 720 or so your good anyways, and with not needing the mortgage anymore its not like your worrying about your credit score anyways :p

4 Evan November 26, 2013 at 4:15 pm

Very interesting in terms of seeing inside the blackbox that is the credit score mystery.

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