does paying off your mortgage affect your credit rating

Misse_4

Hi there

I have always been a MFW and have been over-paying each month in order to achieve this. My father died recently and this now means that the estate left will be enough for us to completely pay off the mortgage should we wish to.

DH and I both want to but have a feeling that we have read somewhere that you should keep a small mortgage (even if only £100 or so) as this increases your credit rating.

I have looked everywhere on this board (mortgages, credit scores etc) but can't find anything that directly alludes to this. My questions are this:

1) Is there a link between having a mortgage and getting a better credit score
2) If there is a link, will it matter too much as we are not looking to borrow any money in the near future anyway

Thanks to anyone who can help

dasherman

Your credit file is based on your payment record.So if you have had loads of loans but always paid them off on time without missing an installment,then you will have a better credit score than someone who hasn't done this.

You will also have a better score than someone who has never taken out any credit,because you will have a positive history while they will have no history at all.

Mortgages,credit cards,personal loans,catalogue purchases,etc are all taken into account. Infact I recently got a copy of my credit file and was quite surprised to see that even my pay as you go top ups for my mobile were on there.

Some people like to keep a small amount of mortgage because they don't want to pay the fees associated with paying it off.But I've never had a mortgage(I saved up!) and I've never had any problems.

Hope this helps!

nimbo

i was told that when paying off a loan (not quite the same i know) that you should keep a small amount as the penalties of paying it off earky include a % of the last monthly payment...

as in was told to keep £10 not paid so that next month they took £10 + 10% as opposed to £1000 + 10% if i paid it all in one go.

think that i have seen someone say similar about mortgages but should read the small print to see if you can save yourself a few £'s when paying it off.

Martinslovechild

I cleared my mortgage last year and have had no problems whatsoever obtaining credit since then.

Edinburghlass_2

You might be interested in watching IPTW this evening, Ch5 at 7.30 - 8.00 as Martin discusses if savings should be used for paying off a mortgage.

It Pays To Watch, five, Wednesday from 7:30-8pm. Discussing when savings should and shouldn't be used to: Pay Off Debts, Pay Off Mortgages or Pay Off Student Loans.

davidlizard

I cashed in all my savings etc early last year and paid the mortgage off.

When I changed gas/electric suppliers, they insisted that I go on a prepayment meter as they reasoned that because I had no mortgage I was not a homeowner, and therefore likely to do a runner.

One phone call put them straight.

misse_3

Thanks everyone, I think that has made my mind up that we are right to pay off the mortgage. We should soon be able to save up for anything that we need in the future just by saving the money that we would have used to pay our mortgage payments anyway.

Wow - I am so looking forward to being able to say 'We haven't got a mortgage' - I think reality is starting to hit home.... :j :j :j

lorac3

:j :j :j :j I am paying mine off on 1st April and to be honest I do not think I will ever take credit again ! I will now save the mortgage payments in an isa and another account so will have the savings as a backup.