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What happens to your credit rating if you pay off your mortgage, and why?
I've heard that your credit rating goes down, but I'm not sure if that's true or not.
asked in credit, mortgage, finance

richardv answers:

I don't think it goes down, but if you have other credit and you use it then you'll be okay.

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spidersinthekitchen answers:

Nothing should happen it only goes up or down when you make a payment or if you fail to make a payment (on all HP, DD's and Mortgages).

Equifax seem to manage credit scores in the UK. This is the FAQ's page for credit scores.


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englishdanny answers:

I don't think that this would change your rating for unsecured credit. If you have paid off a mortgage and don't have charges (secured credit) against the property then the value is effectively your equity which could be used as collateral in charged or secured credit. This type of credit removes risk for the lender and should have much better interest rates than personal loans, credit cards Etc. so in a way your credit possibilities increase.

Supplement from 12/06/2006 01:24pm:

Note: with secured credit the thing that it's secured is at risk in the event of non-payment which is why the forms say,"Your home maybe risk".

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TallScotsGuy answers:

This information is about credit cards...ut I thought it might be worth "sharing" at this point.....

How to Lower Your Interest Rate While Raising Your Credit Score

Did you know that you have power to decrease your credit card interest rate, eliminate fees, and get a bigger credit line? You do! In fact, you have more power over credit card companies than you may think.

Why would you want this power? I will explain why it is important for you to have control, and give you a guideline of what to say to get things your way when talking to your credit card company. It is your responsibility to put your knowledge into action.

Unless you pay off your credit card every month (which I highly suggest you do), you are probably overpaying on interest. It is very common for credit card companies to give you higher than required interest rates. You may have an interest rate equal to prime rate plus 4%. When you put the following information into action this week, you may be able to lower your rate by a couple of percentage points.

Credit card companies love charging fees for any administrative thing they can. Other people have eliminated these fees, and so can you. After you have completed this assignment, you may have saved yourself hundreds of dollars in fees.

Why would a bigger credit line be important for you? If you remember reading the article Improve Your Credit Score, you know that part of your credit score is based on the amount you owe on a card, compared to the total credit limit on your card. The smaller that difference is, the worse your credit score. Get a bigger credit limit -- NOT to spend it, but to improve your credit score.
Now for the assignment:
In order to make this work for you, you need to complete this telephone assignment. It is not hard. I will give you an outline to follow. Follow this outline and you will have a high chance for success in this exercise!

Decide which credit card company you are going to call first. Pull out your card. The phone number for the company should be on the back of the card. Call it.

Supplement from 12/06/2006 05:25pm:

Here is the guideline on what you say…

To Operator: Hi, my name is ________. What is your name please? (Operator answers) Write down his or her name. Knowing and using someone’s name can give you control over the conversation and make you seem very confident, even if you are not.

Thank you. Well, (operator’s name) I am thinking about making a large purchase in the near future, and I called to find out my credit limit. What is my limit? (Operator answers). Hmm… (As if you are not happy).

What is the maximum amount of credit you can give me today?

Operator: How much do you want?

I would like a limit of _______. (Ask for £50,000). In most cases you will not be able to get that high of a limit without proving your income with documents (which you don’t want to do with this exercise), but it opens up the opportunity.

Operator: Do we have permission to pull your credit report?


Operator: Do you still have the same job?
Yes, and I have additional income from a separate business. Assuming that you are starting a business, whether it be in housing, the stock market, infopreneuring, etc.
Operator: What is the name of your business?
It is _________. Think of the name to call your business beforehand. If you don’t have a business license, it’s okay. You can get one later. Don’t include “Property” in the name. Be vague.
Operator: How much money do you make?

Supplement from 12/06/2006 05:27pm:

I expect to make ________. Don’t put your last year’s income or the salary you make at your job. Give them an ESTIMATE of what you EXPECT to make with your job and all side businesses you have.

How much of an increase can you give me today? I would like to make a large purchase for my business in the near future.

He or she will be able to adjust your credit limit. When I did this exercise I was able to increase my credit limit to £25,000. I don’t EVER use the whole limit, but having that amount is great for my credit score. You may use your new credit limit for purchases for your fixer-upper, your website, your book, or anything else for your business.

Okay, now that we have adjusted my limit, it occurs to me I should check my interest rate. What is my current rate? (Operator answers). Hmm…
What is the interest rate for new credit card applicants? (Often, it's 0% for a year. If so, ask for it). May I get that rate?

If they absolutely won't give you a 0% interest rate, use this: I would like to use this card for my purchase, but that rate seems high. What is the lowest rate you can give me today? The operator will then lower your rate to the lowest rate possible.

In addition, can you give me access to credit card cheques at the lowest interest rate you offer? You can use these cheques on purchases that won’t take your credit card. They will be used as cheques.

While we’re at it, would you check and see if I have any annual fees? (Operator Answers). Hmm… I don’t think any of my other credit cards have those fees. Could you have them removed?
The fees can be removed. If the operator says “No,” ask to speak to a supervisor. If the supervisor says “No,” ask if the fees have EVER been removed for ANYONE in the past. Of course they have. The credit card companies are not legally allowed to discriminate. If they have removed the fees for someone else, they can do it for you. Make that your point, if necessary.
Script Success Notes:
1. Own the conversation, be confident and powerful.
2. Be friendly but detached. They want your business.
3. Be friendly and firm. More bees come to honey than vinegar.
4. PRETEND – If this is hard and scary for you, be an actor!!!
5. Don’t take “no” for and answer. Ask for supervisors, if needed.
6. Assume your success, and you will succeed.
You have this money-saving information at your fingertips. It’s up to you to utilize it. Take a few (10-30) minutes right now and make the call. You have nothing to lose but a high interest rate and some unnecessary fees. Remember that you are not increasing your limit to max out your credit card (unless you can pay it off that month), but to help your credit score. You can also lower your monthly payment substantially with your new, lower interest rate.

Good luck, be confident, and make the call!

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