If you’ve recently purchased a home, then you know that it’s a very significant financial commitment. Even a small home usually cost more than a homebuyer has lying around and requires a loan. If you are worried about what your credit score will look like after you’ve purchased your home, here are some pointers to make sure it’s stellar after you’ve finished the home buying process.
Once you’ve decided to purchase a home and completed the loan paperwork, a lender will make a hard inquiry into your credit history. A hard inquiry will cause your score to dip a few points for a short period. A hard inquiry will only matter if you are shopping for loans and applying with several lenders over a long period. You should manage your inquiries so that they happen within the same window thus minimizing the damage to your score. If you apply for all your loans at the same time, credit-scoring formulas will recognize that you are searching for a loan and treat them as one inquiry into your credit.
Over a third of your credit score is made up of how you pay towards your debt. Making your payments in a timely manner will positively impact your score; however, missing a payment will result in large drops to your score. A mortgage is a type of installment loan. A mixture of credit types in positive standing impacts 10% of your score, so adding a new home loan is a plus. Monitoring your credit is an important piece of any financial plan. You will be able to receive a credit report annually free of charge. Even annual monitoring is preferable to only checking your credit when you need to make a large purchase.
Adding a new home loan to a mixture of credit accounts in good standing will only serve to improve your score. Managing your credit over a long term requires timely payments combined with prudent spending habits. A house will not negatively impact your credit score as long as you manage the new debt effectively.