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Question By
halabama

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Is it better or worse to have a mortgage for credit score?
Just curious, because I'm selling my house. I'm wondering if my credit score will go up or down or stay the same.

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Good, in general...

There are a few things to consider here.  In general, having a mortgage in good standing is good for your credit. 

  • It is a stable form of credit that is viewed well in your credit report. 
  • It also tends to help your score when your report is evaluated for the mixture of credit that you have. 

There are also negatives to consider. 

  • Having a mortgage increases your debt-to-income ratio which can lower your score, especially if it pushes the ratio over 35%.
  • The act of applying for a mortgage will show up as credit inquiries on your report and will temporarily lower your score.

Bottom line is that depending on your specific situation, mixture of other credit, and your debt to income ratio, your score may go up or down if you sell your home and no longer have a mortgage.

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Reply by
pennstate04

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this is not correct. please do not dispense advice if you do not know what you are talking about. income is NEVER part of a credit score computation. the agencies have no idea what your debt to income ratio is, and your DTI in no way shape or form affects your credit score. also, selling your house does not incur mortgage inquires. 

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initially it will probably stay the same. installment debt (fixed loans like auto loans and mortgages) if paid as agree can help give balanace to a credit report. typically, if you only have one type of debt, your score will not reach it's maximum. it's a small part of the equation, but the agencies do take into account a mixture of accounts on your report.

if your credit is really really good, like 800 or so, you might notice your scores drop over time as you move away from having a "balanced" credit report. keep in mind i'm assuming you have other established credit on your report. and when i say drop, it's not like they're going to go from 850 to 580 just because you don't have a mortgage. but if over time say you only have credit cards, it might come down from 800 to 750 or something like that. still very good, but not it's fullest. 

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