I have heard that I should not pay off my home loan before securing a loan for a new home. The reason I was told is that my credit score is higher if I have an existing home loan even if I only need a $100 to pay it off. Something about the payment history still showing up in the credit report if the loan is not paid off being a good thing. Can anyone confirm/deny this?
2007-01-24 16:59:27 · 2 answers · asked by Chris 1 in Business & Finance ➔ Credit
bolderdash! so long as you paid your note on time, everything works in your favor. believe me, a purchase as big as a house, with a long term mortgage, is going to show up for quite some time as a very fine indicator of your credit capabilities!
2007-01-24 17:05:37 · answer #1 · answered by Louiegirl_Chicago 5 · 0⤊ 0⤋
Your credit history from the morgage will increase your credit score but...
The way it works is your net worth. If you owe money to a bank (etc) you are in the negative. That means your ability to pay for other, debts is greatly reduced, especially on a homeloan. Your house can be held as equity if you own it yourself. The way they figure, the more money you owe then the less able you are to pay back, there for they will offer you less credit. It doesn't lower you score, but it does effect the credit you are offered over all.
-50,000 Home
-10,000 Car
+1,000 savings
equals 59,000 you are in debt
No matter how good you score is, what you owe does effect your purchase power (credit limit). You income and savings are also a factor in some cases, given a large quantity of either.
2007-01-24 17:07:39 · answer #2 · answered by Satanic Panic 2 · 1⤊ 0⤋