Sold my house. Score went down?

[Joey]

My credit was always excellent, and I’ve always qualified for the best rates. Four months ago we sold our home because we’re building a new one.

While applying for a new mortgage we were astonished to learn that our credit score has dropped significantly.

The only thing that changes id the mortgage that we no longer have. We have almost no other debt. We don’t carry a balance on our credit cards, and the only debt we do have is two student loans that are current.

Any thoughts are welcomed

[Stacy Wall]

Not sure but here are a few thoughts:

Part of credit scores is credit diversity (10%). Having a mix of credit types actually raise your Fico score. Since you sold your house and paid off the mortgage, you no longer have an active mortgage. This may lead to a drop in your score because your credit is les diversified.

Another thing may be your credit cards that you’ve mentioned you paid off. Have you stopped using them? If so, that might have the same effect as if you’re not using revolving credit at all, with possibly two negative effects:

• Less credit diversity that lowers your score further
• No stream of timely payment that build credit. That could lead to further drop in your Fico

You need to show activity on these credit cards.

Even with both negative effects on your score, I would expect a drop of maximum 50 points. Certainly not drastic, but enough to get you less-than-excellent terms.

The only one thing that could have dropped your score more significantly is closing the credit card accounts. I hope you didn’t do that. Closing revolving credit accounts (even if they are in good standing) is not recommended, and can really hurt your Fico. If that the case, then, well..

Hope this helps.

[Author]

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