Mortgage free and debt free (nearly) but....

londonbinman

Hi, new poster here. I have looked around the forum but havent come across an answer for the following.

I am well on the way to becoming mortgage free as planned within the next 2 years. :beer:

Because I have a mortgage and paying it off regularly and never had any problems with debt , my credit score is good.

But a friend said oh be careful if you pay it all off (mortgage/debt) your credit rating will drop and you wont be able to get a loan/mortgage/etc in the future if needed.

I guess it sort of makes sense if you have loan/debts then 'they' can credit score you but if you don't 'they' cant.

Has anyone come across this or know if this is true ?

argomatt

I have come across this problem with people who have never had credit before, and obviously the lenders are concerned because there is no track record built up yet.

But I would have thought that having had a mortgage and paid it off would stay on the credit record for a while and also you are most likely to have other current credit ongoing even after the mortgage has gone, like if you use credit cards or pay home / car insurance on a monthly basis, which would keep your credit score going?

guesswho2000

argomatt wrote: »

I have come across this problem with people who have never had credit before, and obviously the lenders are concerned because there is no track record built up yet.

But I would have thought that having had a mortgage and paid it off would stay on the credit record for a while and also you are most likely to have other current credit ongoing even after the mortgage has gone, like if you use credit cards or pay home / car insurance on a monthly basis, which would keep your credit score going?

A cleared mortgage will remain for six years from the date it's settled. Similarly, the ongoing use of a full current account and credit cards etc will keep your history going.

Not having a mortgage itself won't lower your credit 'rating', otherwise first time buyers would never be able to get on the ladder! Also, your house value info appears on your report as a homeowner (does for me anyway, and the value of the property I rented never did).

Also to clarify, insurance monthly payments etc won't appear on your CRA files to my knowledge - none ever have for me on any of the three agency reports. Though of course with no mortgage you'll be able to pay insurances etc in one lump in order to avoid their extortionate interest charges, won't you?