Q: Given the stock market's volatility, low interest rates and little mortgage interest to itemize on our tax return, we were thinking that paying off our loan might be a good investment. But how would it affect our credit score?
| Row 0 - Cell 0 | How I Kicked the Credit Card Habit |
| Row 1 - Cell 0 | When Is It Worth Going Into Debt? |
| Row 2 - Cell 0 | Search for Low-Interest Cards |
The FICO credit score predicts future credit risk. So although you may take satisfaction in burning your mortgage, you won't receive a bonus for your accomplishment. Craig Watts, a spokesman for Fair Isaac, the firm that created the widely used score, says that your credit score will likely be unaffected. If your mortgage is your only installment loan, however, your score could suffer a slight ding, although not enough to make you want to change your plans.
An installment loan, such as a mortgage or car loan, can boost your credit score (assuming that your payment history is good) because it improves your mix of credit, and demonstrating your ability to manage different types of credit is always a plus. However, "types of credit used" is only one of five categories used in computing a FICO score and is given only a 10% weighting.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The category includes other elements that do not fit in elsewhere, such as student loans, so eliminating one installment loan usually has a minimal effect. Your history of on-time mortgage payments over 15 to 30 years -- which constitutes 35% of your score -- should outweigh any downside risk.
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.
-
What New Tariffs Mean for Car ShoppersThe Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
Roth IRA Contribution Limits for 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute VacationTravel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How Much Life Insurance Do You Need?insurance When assessing how much life insurance you need, take a systematic approach instead of relying on rules of thumb.
-
When Is Amazon Prime Day? Everything We Know, Plus the Best Deals on Apple, Samsung and MoreAmazon Prime Amazon Prime Day is four days this year. Here are the key details you need to know, plus some of our favorite deals to shop during the sale.
-
How to Shop for Life Insurance in 3 Easy Stepsinsurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage RateBecoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
