Missed or late mortgage payments will remain on your credit record for seven years. If you’re having problems keeping up with payments, selling your New Orleans home for cash might benefit you.
No Need to Fear FICO Fallout with Big Easy Buyers
A credit score has one general purpose: to tell lenders whether or not to lend someone money. It is not a measurement of financial health; rather, it scores how well people manage credit and borrowing money.
According to Credit Karma, there are six factors that impact a person’s credit score. These include:
- Percentage of available credit utilized, with or without carrying a balance
- Percentage of on-time payments made as compared to late payments, a major factor in calculating a credit score
- Derogatory marks on the credit report, including accounts in collections, bankruptcy, foreclosure, and liens
- Average age of open credit lines. A long credit history is usually an indication of an ability to successfully manage credit.
- Total lines of credit available, as well as the types of credit (both revolving and installment)
- Total hard credit inquiries (when a lender checks credit in order to approve a loan or issue a credit card). Examples of hard inquiries include auto loans, student loans, and personal loans.
While some of these factors weigh more heavily than others, none works independently of the rest, and each is taken into consideration when your credit score is tabulated.
How Selling Your House Might Affect Your Credit Score
The simple act of selling your house will affect your credit score, but not necessarily in the way you might expect. Consider these examples:
- If you’ve made all your mortgage payments, sell your home, and then pay off your mortgage in full, the paid mortgage will be a plus on your credit report for 10 years from the paid date.
- Any negative information from your mortgage payment history, such as missed or late payments, will remain on your credit report for seven years. Even after you sell your house, a negative payment history will follow you.
- Selling your home for cash won’t erase a negative payment history, although getting rid of your mortgage payment might enable you to pay off other debts.
- Selling your home in a short sale (for less than is owed on your mortgage) will cause your credit score to drop significantly — up to 160 points, depending on what your score was in the first place.
- If you sell your home and then subsequently decide not to carry a mortgage and rent instead, it won’t hurt your credit, but it likely won’t help your creditworthiness either. While points aren’t usually taken away because you don’t have a mortgage, you could gain points on your credit report if you do.
If you sell your New Orleans house for cash, this will generally have a positive effect on your credit score because it will help you avoid missed mortgage payments, property-tax delinquency, and foreclosure. A cash payment for your house will allow you to pay off your mortgage and avoid going further into debt.
To keep your credit score intact and sell your home fast, contact Big Easy Buyers to learn about our four-step process and the fast and easy solutions we offer to homeowners in the greater New Orleans area.