Impact of Paying Off Mortgage and Renting on Credit Scores

Playful Family in Front of Their House
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?


Dear TKL,

How paying off your mortgage and deciding to rent instead will impact your credit scores depends on your unique credit history.

Mortgage Loans Are a Good Indicator of Credit Risk for Lenders

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, if the account was never late, 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.

Get Your Credit Score to See a List of Your Risk Factors

The best way to know if a mortgage would be helpful is to get your credit score. When you get a free credit score from Experian, you will receive with it a list of the risk factors that are currently impacting your score. These factors will give you insight into what you can to do to maintain a strong credit history and improve credit scores.

Thanks for asking.
The "Ask Experian" team