LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace. Show
How Does LendingTree Get Paid?LendingTree is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace. Buying a Home Will Hurt Your Credit Score, but Data Shows It’ll Rebound Within a Year on AverageWritten by Jacob Channel Edited by Dan Shepard Xiomara Martinez-White Updated on: September 28th, 2021Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners. Taking out a mortgage is likely to lower your credit score, at least in the short term. How much your score drops depends on various factors, including credit history, but a new LendingTree study suggests getting a mortgage doesn’t significantly impact your credit score. Specifically, the study shows credit scores are unlikely to fall by more than 20 points on average across the nation’s 50 largest metros in the four and a half to six months after getting a mortgage. Further, the study shows that even when credit scores fall by more than an average of 20 points, they typically rebound to pre-loan levels within a year. Ultimately, the research suggests borrowers who get a mortgage don’t need to worry that doing so will seriously damage their ability to access their credit. TABLE OF CONTENTS
Key findings
Metros with the smallest credit score decline after getting a mortgageNo. 1: Sacramento, Calif.
No. 2: Memphis, Tenn.
No. 3: Detroit
Metros with the largest credit score decline after getting a mortgageNo. 1: Birmingham, Ala.
No. 2: Oklahoma City
No. 3: Cincinnati
In the long run, a mortgage can help your credit scoreWhen a consumer takes out a mortgage, it adds a large balance to their credit report. Because credit-scoring agencies take into account the amount of money a consumer owes when formulating a person’s credit score, this will typically result in a borrower’s score falling. Fortunately, this decline is usually temporary. In fact, showing that you can effectively manage your mortgage debt could help strengthen your overall credit rating over time. For example, by keeping up with your mortgage payments, you’ll show that you know how to handle a significant amount of debt, and that will likely positively impact your score. Further, having a mortgage will diversify your credit profile, which could also help boost your score. Of course, your score will suffer if you ignore your mortgage — especially if you default on your loan and your home is foreclosed. Nonetheless, by keeping up with your monthly mortgage payments, you’ll help keep your overall credit profile in top shape. Tips for improving your credit score after getting a mortgageBy keeping the following tips in mind, you can help ensure your credit recovers after you get a mortgage.
MethodologyTo determine how getting a mortgage impacts credit scores, analysts used data from the LendingTree online marketplace to look at more than 6,000 consumers who lived in one of the nation’s 50 largest metropolitan statistical areas (MSAs) and took out a mortgage in 2020. Analysts then tracked these consumers’ credit scores from the time their mortgage originated through August 2021 to see how many days it took until the scores returned to their pre-loan levels. |