Why did my credit score drop when I paid off my mortgage?
A quick explanation of a common, usually temporary credit score dip.
Why did my credit score drop when I paid off my mortgage? This question often comes up when homeowners celebrate a payoff and then notice an unexpected score change.
Answer
A credit score can dip after a mortgage payoff because closing a long standing installment account can change your credit mix and average account age. The loan’s positive payment history remains, but the active trade line no longer contributes ongoing installment debt data. If the mortgage was your only installment account, your profile may appear less diverse to scoring models. In addition, if other balances on credit cards are relatively high, their impact on utilization becomes more prominent. This drop is often temporary, and responsible use of remaining accounts typically helps scores stabilize or improve over time.
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