Credit Advice

Impact of selling house and renting on credit scores

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Credit Advice

Impact of selling house and renting on credit scores

Dear Experian,

We purchased a house four years ago and sold it recently for more than we mortgaged originally. We are now renting. Does this help or hurt our credit?

- TKL

Dear TKL,

The answer, as with so many issues related to credit and credit reporting, is that it depends.

Having a mortgage with a positive payment history often is viewed positively by lenders. It usually is the most substantial credit commitment people have; therefore, it is a good indicator of credit risk. On-time payments are an indicator of low risk, but late payments on a mortgage are a strong indicator of high lending risk.

From that perspective, no longer having a mortgage could be seen as negative. However, I suspect that it would not be very negative in your situation for several reasons. First, you paid the mortgage in full. Second, the paid mortgage will remain part of your credit history for up to 10 years from the paid date, so you won’t lose that positive history. Third, you may have used the money you gained from the sale to reduce other debts.

As a result, your overall credit history is probably very strong. So, no longer having the mortgage may have little or no impact on your creditworthiness.

Not having a mortgage doesn’t hurt your credit scores, it just doesn’t help them. Points aren’t taken away because you don’t have a mortgage. However, you might gain some points if you do have a mortgage.

The best way to know if a mortgage would be helpful is to get a credit score and score report. You can get your credit score and credit score report from Experian at www. experian.com. The report will describe exactly what is positively and negatively impacting your credit score.

Thanks for asking.

- The "Ask Experian" team

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