Does selling your house affect your credit score?

There are lots of reasons that you might be selling your house. Maybe you’re planning to buy a new one, downsizing to a smaller property, or prefer to rent instead of paying a mortgage so a landlord can deal with maintenance responsibilities.

Whatever the reason, while exciting, it can sometimes feel overwhelming, too. Your mortgage is often your biggest debt so it’s normal to have some anxiety whenever it changes.

Because your mortgage is such a substantial loan, creditors consider it a useful factor when assessing your creditworthiness. But does selling your house affect your credit report? It depends on the type of sale, whether you’re taking out a new mortgage, and how you’ve managed your mortgage payments until now. We’re here to unpack it for you.

Does selling your house help your credit report?

When you sell your house and pay off your mortgage in full, it does. This shows you’re able to manage large amounts of debt and allows lenders to view you as more desirable to lend to.You could keep that momentum going by getting another mortgage, showing off your positive record of mortgage payments like a shiny badge of honour.

If you sell your house and don’t take out a new mortgage, by buying a house in cash or moving into a rental property, you won’t get the benefit of regular mortgage payments working for your credit history anymore.

Why did my credit score drop after selling my house?

Selling your house is unlikely to impact your report just by itself. But it is common to see your score dip when you relocate to a new home. Practical things that can affect your credit report include:

• opening new utility bill accounts, 
• registering with your new address on the electoral roll
• Not updating each bank, credit or bill provider to tell them you’ve moved (this shows inconsistencies on your credit reports, read here about fixing those) 

Once these have been set up (or fixed, in the case of the latter point) it should only need six months of showing you can handle credit well before your report starts to settle back to where it was. So don’t worry.

If however, you sold your property for less than the mortgage value, it could be a different story. This is called “negative equity” and it’s very likely to have a negative impact because you will still be in default for the remaining balance on the mortgage.

The mortgage lender may try to reclaim the remaining debt, so your history could be damaged even further if the creditors sue you for the difference. But that is rare — typically you would have already asked permission from them before making a decision to sell in negative equity.

How do I improve my credit report without a mortgage?

It’s important to say that not having a mortgage won’t negatively impact your report. If you don’t have a mortgage you can still grow your creditworthiness in other ways. In the unlikely event that your score drops after you sell your house, or if you just want to strengthen your history without having a mortgage, why not join Loqbox?‍

If you’ve sold your house and entered into a rental contract, with our best value membership, you can actually use those regular rent payments to improve your credit history — much like mortgage payments.