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From the Experts at Credit.com

How Selling Your Home Can Impact Your Credit

by Lucy Lazarony

How Selling Your Home Can Impact Your Credit

Are you getting ready to sell your home, but wonder if it will affect your credit? Selling your home could impact your credit in a few key ways. Let’s take a look…

Impact On Your Payment History

Having a mortgage with a positive payment history is a big plus for your credit. 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 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.

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 good strategies for lifting up your credit score over time.

Track your progress through Credit.com, where you can get two free credit scores, updated every month.


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  • Gigi

    my sister told me that if I sell my house with my history of on time payments to rent I may not be able to buy again since I’m the hook for my kids’ huge student loan debt – is this true? I plan to pay down my credit card debt. Thanks!

    • http://www.credit.com/ Credit.com Credit Experts

      It might be. When you apply for a mortgage, the lender will look at your credit scores, your income and your debt obligations. We’re guessing you didn’t have the student loan debt when you qualified for the mortgage you have now. We addressed the issue of student loans and mortgages here: How Student Loans Can Hurt Your Mortgage Application

  • Karneus

    I was wanting to sell my home and purchase a home closer to my employment but I was also wanting to use some of the money from the sell of the house to pay off some school debt, would it be smarter to pay off the school debt before or after getting the new loan?

    • http://www.Credit.com/ Gerri Detweiler

      It depends on your debt ratios and how much of a down payment you have. If you have enough of a down payment to get the loan you want and avoid mortgage insurance then you could use money to pay down debt. But paying down student loans may not help as much as you think: it’s the monthly payment that counts when it comes to getting a mortgage, and unlike credit cards, lowering the balance on a student loan doesn’t usually reduce the payments.

  • Gwen

    my husband has been forced into disability. I am making the mortgage payment but it is very difficult. We got a modification but it hasn’t helped the payment decrease. The house is bigger than what we need. My credit score has been hit b/c of our sudden income drop. I want to sell the house but I have been told our credit score needs to be over 580 to get a new mortgage loan for a smaller/cheaper home….if we sell our current home, how long will it take to get our credit score back up?? I am thinking we should sell it, rent for a while and hopefully be able to buy something else in the next 6-12 months….I am just feeling nervous and want to make a good decision about this. As it is I am working…..I pay the mortgage, the electricity and other utilities…and after groceries and gas there is no money left……I would like to have a positive cash flow…..

    • http://www.credit.com/ Credit.com Credit Experts

      Gwen —
      A drop in income should not affect your credit score unless the result was that you paid bills late. Late payments have a big impact on your credit. You can get two free credit scores from Credit.com, along with personalized advice for improving yours. Those scores are updated every 30 days. Also, be sure you monitor your scores, and understand that scores fluctuate. You may also want to get a copy of your credit reports (you can get one free every year from each of the three major credit bureaus) to check for errors. The information used to calculate your credit scores comes from here. Here’s how to get your free annual credit reports.

  • Kaleigh

    my ex and i bought a house 2 years ago and have since separated. we are looking into an “assumption” of the loan, for him to keep the house and I basically just walk away. how does that affect my credit?

    • http://www.Credit.com/ Gerri Detweiler

      It depends on what you mean by an assumption. If you do it legally with the lender, and they remove you from the loan that’s not a problem. But if you do it without getting the lender’s blessing and your ex or whomever doesn’t pay you are stuck with the mess that creates. So try to do it above board if you can.

    • Emily Combs

      I had this issue. You have to refinance if he is unable to on his own then you will be stuck with it on your credit. You can get a quit claims but it will still impact your credit, you just will have no rights and they can still come after you for payments.

  • Adam

    I’m very behind on my house payment, we want to sell it and pay off all of our other debt. We might be able to get a loan modification, would it make any difference to do the modification before selling or just sell it in my current behind status?

    • http://www.Credit.com/ Gerri Detweiler

      If you can sell it and net enough to pay off the balance (including any costs associated with the sale, such as real estate commissions and closing costs) then it may make sense to do so. But if you can’t sell it for what you need to owe then you may need to seek a loan modification. Loan modifications can take a long time, however, and they are never guaranteed.

  • Casey

    How long does it take for the paid off mortgage to show up on my credit report? I’m sending in my payoff amount in the beginning of September. How soon can I see that reflected? Thanks in advance for your help!

    • http://www.credit.com/ Credit.com Credit Experts

      It should show up within 30 days of being reported to the bureaus (so part of it will depend on how quickly your lender reports it to the bureaus).


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  • Meet The Expert

    lucy_lazarony GravatarLucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.
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