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05/17 2010

Paid-off mortgage may not help scores

Dear Liz: I have a problem everyone would probably like. I just paid off my house early. The previous owner carried the mortgage. What is the best way to have it appear in my credit reports that I own my home free and clear, as the loan has never been reported to them? We did have a contract drawn up for the loan and I have records of all payments including the extra amounts I paid to close the loan out early.

Answer: You probably can’t do what you want to do. Even if you could, it might not do as much good as you might think.

Lenders must be subscribing members of a credit bureau in order to report information to it, and that’s an expensive proposition — well beyond the means of most individuals who carry a mortgage for a buyer.

Having a mortgage on your credit reports typically does help your credit scores, but having a paid-off loan doesn’t necessarily give you a big boost. Owning your home free and clear is good for your wallet and your psyche, but it’s not a big factor in your credit scores.

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