Data Facts Lending Solutions Blog

The Credit Impact After Selling Your Home

by Jennifer Hamby

Aug 11, 2015 8:00:00 AM

real-estate-sign-sold

The housing market is HOT!  Are you getting ready to sell your home, but wonder if and how it will affect your credit? Selling your home could impact your credit in a few key ways. Let’s take a look and some of the ways- both postive and negative-your score could be affected after the sale of your home...

Impact On Your Payment History

Having a mortgage with a positive payment history is a big plus for your credit. Payment history is 35% of your credit score and a positive mortgage payment history is the single most important thing you can do to get and keep a higher credit score.  When you sell a home and pay off a mortgage in full, the paid mortgage will stay on your credit report for 10 years from the paid date.

However, that means any negative information from your mortgage payment history will stick around, as well. Negative information, such as a missed mortgage payment, remains on your credit report for seven years.

So even after you sell a house, the impact of how you paid your mortgage can impact your credit for years to come. 

Impact On Your Current Debt Obligations

If you sell your home and obtain a mortgage for a new home, you have the opportunity to continue benefiting from keeping a good payment history on a current mortgage. Over time, this can help raise your scores.

However, if you sell your home and choose to rent and therefore do not carry a mortgage anymore, it won’t hurt your credit, but it also will not raise your score, because there isn’t new account history showing how you handle your mortgage payments.

You might also decide to pay down existing credit card debt if you’re able to allocate some of the funds from the sale of your home.  Paying down revolving debt can raise your credit scores, especially if you are using a high percentage of your available credit (your debt utilization is another important factor in your credit score).

Short Sales and Your Credit

One way that selling your home can negatively affect your credit is by opting for a short sale. A short sale means you sell your home for less than you owe on the mortgage.

Selling your home in a short sale will cause your credit to drop significantly. It’s important to consider your options carefully before you decide, and be prepared to work over the next several years to re-establish better credit if a short sale is your best option.

Staying current with your other payments and paying down credit card debt are always good strategies for higher credit scores.

For more information on how short sales can negatively affect your credit score and for how long, please join our Advanced Credit Webinar on Thursday, August 13th at 10:00am CDT  

Register here  https://attendee.gotowebinar.com/register/1313092128454833666

Topics: Mortgage loan, short sale, Mortgage Lending, Understanding Credit Scores

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