Why Your Credit Score Will Take a Hit Following a Mortgage

A mortgage is a bittersweet thing for a credit score.

Unless you’re paying your house in full, taking out a mortgage is just a part of the home ownership process. Financial advisors have always warned home buyers that a high credit score will benefit them in the long run. A solid credit score will yield a lower interest rate which reduces the total amount of money being paid through interest over the course of the mortgage. Once you do become approved for your mortgage, it will affect your credit score in several ways.

Your Credit Will Drop

As soon as you obtain your mortgage, expect your credit score to temporarily suffer. Your credit score is essentially a representation of your ability to pay back any debt. Because this may be one of the largest loans you’re going to be taking out in your entire lifetime, your score will go down until you actually start fulfilling the mortgage payment obligation.

Be Sure to Pay Your Mortgage on Time

Because you’re going to see your credit score drop, it’s important that you focus on raising it back up to what it was prior to taking out a mortgage. This can be done by being responsible with your monthly payments. There are multiple services that claim to raise your credit score in numerous ways, but many of them are either scams or will just hurt your score more than it will benefit it. Be a responsible borrower and continue to make timely payments. Your score will then naturally rise over time.


 

Kuba Jewgieniew is the head of Realty ONE Group, a real estate brokerage firm that has nearly 5,000 associates in California, Nevada, and Arizona. 

May 31st, 2016 Posted in Investing, Real Estate

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