Many Potential Homebuyers Want to Know If a Mortgage Will Improve Their Credit Score…Will It? Find Out Here

by Ruth Hall . 2 Comments

While the types of debt you carry have an impact on your credit scores, making regular payments makes up 35% of your credit score. Therefore, if you make every monthly mortgage payment on time, your credit score will gradually increase. Many lenders offer automatic bank transfers for borrowers to help them avoid forgetting a mortgage payment.

While buying a house can help your credit improve over time, it may initially have a negative impact on your score. Every time an institution checks your credit, a hard credit inquiry will appear on your report. Sometimes, credit checks will be a “soft” inquiry which will not affect your score. But major loans such as auto, or mortgages, will definitely be a hard credit inquiry. These inquiries last for two years. Enough of these, and your credit will drastically drop.

Provided a change in circumstances doesn’t cost you your home, you can expect to eventually pay off the mortgage. Whether you remain in the house for the duration of the loan term or sell the home, the fact that you paid off a large debt will appear in your credit report. The paid-off mortgage will remain within your credit history for seven years and demonstrate to future lenders that you can be trusted to pay your debts responsibly.

Although lenders and creditors will look favorably upon your status as a homeowner, your monthly mortgage payment is a liability until you pay off the loan in full. When you apply for a new loan, your lender will compare your monthly debts to your income when determining whether you can afford the payments. Regardless of how high your credit score is, a costly mortgage payment can hurt you if it impedes your ability to qualify for other loans.

Read this helpful article on 6 Things to Consider Before Paying off Your Mortgage.

2 Responses to Many Potential Homebuyers Want to Know If a Mortgage Will Improve Their Credit Score…Will It? Find Out Here

  1. Josh says:

    I can tell you that a mortgage will definitely increase your credit score..but expect it to decline when you first get approved, and for a couple of months after that. It has absolutely increased my score, but I would recommend to anyone to set up automatic payments so that you don’t forget. All it takes is one missed payment to ruin your credit until it falls off after 7 years.

    February 29, 2016 at 9:32 pm
  2. Randy says:

    Never miss a mortgage payment. It WILL be the death of your credit. For a long time.

    March 26, 2017 at 3:53 pm

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