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What Happens to My Credit When I Pay Off My Mortgage?

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The answer may surprise you.

If you’re about to pay off your mortgage, you should feel proud of the financial responsibility you’ve demonstrated. That last mortgage payment is certainly cause for celebration and is a huge accomplishment. That’s why your credit score should experience a triumphant leap as big as the one you’ll probably make when you drop that last check in the mail or click that final mouse button, right? Not exactly and here’s why.

Creditors and scoring models have most likely factored in your payments already.

Most likely, the formulas that have been paying attention to your credit record over the years have already given you credit (no pun intended) for consistently paying down your mortgage. The perceived risk that you’ll default on debt may not, and probably shouldn’t, change too much based on your ability to make that one final payment. This may seem cold and maybe even unfair. But here’s why that’s a good thing.

The fairness of the credit system depends on it being based on statistics and probability.

If you’ve had the same mortgage lender over the years and know them personally, they’d probably want to celebrate your last mortgage payment as much as you would. And that’s great, but you wouldn’t want your creditors making official credit decisions based on emotion or factors other than ones you’ve demonstrated about your ability to pay your debts. Aside from that being illegal, it introduces the possibility you may not be treated the same way someone else with a similar credit record might be treated.

Though you may be surprised – even disappointed – to see that your credit record doesn’t look too much different after your last mortgage payment than it did beforehand, take heart: you’ve likely already reaped the benefits that come from consistent mortgage payments. You’ve also likely set yourself up well for a future of solid credit..


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What You Need to Know:

There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.

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