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Household Finances

Credit score question

cearbhaill (zone 6b Eastern Kentucky)

19 years ago

I understand that one of the factors used in determining a credit score is the length of time you've been paying on large debts like mortgages. So how does paying off a mortgage and not getting a new one affect my score?

We recently sold a home for a fair profit, and bought our new house outright with cash. All credit cards are kept at zero balance and there is very little I ever use them for to begin with. My credit card limits are high, but without a mortgage in the picture will my score go down? Do I need to set up a HELOC to maintain a high score?

The only debit I am carrying is a 0% car loan, and I am afraid that a lack of active accounts will drop my score.

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Comments (5)

myfask
19 years ago
The first question is have you pulled your credit reports?
I would even spend the few dollars to get your score.
You can keep activity on your cards without runnning up debt.
See which of your cards offers the best rewards program. I like the cash back ones.
Use that card for all of your monthly expenses and then pay the balance when you get the bill.
You will have the activity,get the rewards and not have to go through the expense of getting a HELOC.
Congrats on being able to buy your new house with cash
quasifish
19 years ago
I have heard in the past that paying off a mortgage does cause your credit score to drop by a certain number of points after the fact- I can't remember the exact number offhand though.

However, I can tell you from experience that you don't have to have large debt or a mortgage to have a high credit score. When we went to buy our first home, we hadn't carried more than $2500 in CC debt at any time and had never had a mortgage or car loan; our credit scores were 820 and 810 respectively (DH apparently got a bonus 10 points for having an old cancelled Pier 1 CC in his name- it was the only difference).

FWIW, we do what myfask referenced and use a CC for all expenses and pay it in full each month. Since we put everything we can on the card, some months it can be quite high and current activity shows and affects your credit score- it may be one more thing we did right without knowing.

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Evaf , thank you! I will check out credit karma. The only negative things on each of our credit reports are a few medical bills. Yes we do use loans ( like I said my husband likes to change cars every year... oh, and i have a new student loan, graduated nursing school last year!) And we are looking to refinance our home, so that will be a new loan. The guy at lending tree calledafter we were apapproved and said he was puzzled by the low scores, because they have people with scores of 725 or better that have don't have credit histories as good as ours. He said that they have a department that specializes in fixing credit scores, and they are going to look at ours because they shouldn't be this low. We will see if he calls back, because the last one didn't. That's why I asked the question here. Evaf, i thank you. Yours was a very helpful response. Kirkhall, I'm not sure if I'm being overly sensitive, but I did not find your response helpful at all.
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cearbhaill (zone 6b Eastern Kentucky)
Original Author
19 years ago
I see my credit score monthly, and really enjoy when it goes up.
Thanks for the responses. I do hesitate to use CC's for all our daily expenses as I have had problems back in my past running up balances "just for a month or two". While this was years ago I still maintain a healthy fear of falling into it again.
saphire
19 years ago
If you can buy a house with cash, what do you really need your credit for anyway?

Seriously though, as long as you pay your bills on time you do not need to worry about yout credit score. For loan purposes, anything above 750 is all the same rate
jakabedy
19 years ago
I don't think "not having a mortgage" will have a great effect. DH and I sold a home in 2005. I bought the current one in my name only -- he's not on the mortgage. So he hasn't had a mortgage in more than two years. We paid off some high-balance cards and the last car in 2005.

Currently we use two joint credit cards -- a joint USAA that we pay off each month, and a joint Discovery that he uses for purchases for a rehab property he's working on.

My score is 820 and his is 807(?)

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