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The reason I asked is because as I understand it if you close an account it can hurt your score. Since paying off a mortgage is technically "closing" an account what does it do to your score?
I think it is better to pay off your mortgage if you can, rather than worry about any minor impact on one's credit score.
My own impression is that these scores are very flawed. Think of it, if you were going to loan some one money would you first consider their income and debt and assetts and liabilities or not? The FICO scores have nothing to do with income and assetts. In effect one's score is dependent on how many cards one has used and accumulated debt (and just managed to keep avoiding a missed payment). So some one who was prudent and did not take out many cards and thus has a higher portion of the balance on a single card, his/her FICO score would be low. Worst that person could be earning a high six-figure salary and still be denied credit due to a low score..
The credit problems we are facing today is because creditors are relying on a flawed credit rating model. The day creditors start going back to the old days when the local bank would look over one's income/expenses and assetts/liabilities, we will see less free credit available and also less bankruptcies.
I have paid off my mortgage and only use 2 cards for getting cash back. If there was no cash back, and banks could protect the checking accounts like credit card companies do for fraud charges, I probably would not use a credit card, just a bank check card would suffice.
ntkebh wrote:
The reason I asked is because as I understand it if you close an account it can hurt your score. Since paying off a mortgage is technically "closing" an account what does it do to your score?