How Buying a House Affects Your Credit Score

When buying a new house it’s easy to focus on qualifying for a mortgage. However, it is also important to remember that securing your new mortgage impacts your credit score. By understanding how applying for a mortgage and purchasing a house can affect your credit score, you can more effectively manage your credit score.
Here are three ways buying a house affects your credit score:
Hard Inquiries from Potential Lenders – Before buying a house, you may apply with several financial institutions to try to find the best rate. This results in a hard inquiry on your credit report, which means that you have applied for a loan—which can drop your credit score. Redfin.com recommends that if you are putting applications in at multiple lending companies, make all of your applications within a window of 14 to 45 days. This way, the credit bureaus know you are applying for a loan and only count one hard inquiry instead of multiple.
Impact of Late Payments – It’s important to pay your bills on time—especially your new mortgage payment. Missing a payment could decrease your score. Keep in mind that 35 percent of your credit score is based on payment history. Because your bank will likely include your first payment in your closing costs, be careful not to forget your second payment, which will likely be two months after your closing date. You may want to consider setting up an auto-draft payment if you are prone to being late on bills.
Shortens Length of Credit History  According to Motley Fool, 15 percent of your credit score is based on the length of your credit history, which includes how long you have had your oldest loan, the average length of time you have had all loans, and the amount of time you have had each account. When you get a new loan, the average length of time decreases, as does the impact of the brand new mortgage as an individual account. Fortunately, this impact lessens as the months go by and you have the loan for a longer amount of time.

Buying a house is a milestone as well as a huge financial commitment. By taking steps to minimize the impact to your credit score, you can keep your credit in top shape while enjoying your new home.