Why Buying a House Hurts Your Credit Score

Financial gurus encourage consumers to keep their credit score in good shape. This will increases your chance of mortgage approval. 
But here’s the kicker:
Fewer financial experts will discuss how your mortgage can drag your credit score.
To clearly explain it, let’s go to the basics of a credit score model. Here are the five main factors that make up the credit score:
•	New credit applications,
•	Credit amount,
•	A mix of various credit type,
•	Paying on time, and
•	Length of credit history.
Now with these factors in mind, let’s see why mortgages pull down your credit score.
Why does home buying drag your credit score in the short-term?
Buying a home can definitely cause a short-term ding in the credit score because a mortgage is still a loan.
New Credit Inquiries Can Cause You Some Points
Multiple credit inquiries mean various lenders will be pulling out your records from the credit bureaus. This will create a credit pull that can knock off 10 to 20 points off your credit score. Whether you apply for a mortgage, car loan or credit card, it will cause a dip in your credit score. That’s how the credit score model works!
But there is an exemption. If you make mortgage inquiries within 15 days, the credit pulls will be considered as a single hard inquiry. You may still get some credit score dips but you can keep it at the minimum.
Credit Amount Used
Three to 10 months after your mortgage approval, your credit score will further drop. This means the credit bureaus have already picked up your new mortgage account. 
Increased debt utilization accounts to 30% of your credit score. And your mortgage naturally has a higher amount than your other loans. 
The more loans you have under your name, the lower your precious scores will go. This is also the very reason why you must not overuse your credit cards while you are still paying your mortgage.
How to get your score to rebound quickly after buying a home?
Of course, it gets better. There are ways to earn back your credit score!
The mix of various credit type

Having different types of credit makes up 10% of your credit score. Lenders prefer consumers who can responsibly handle various types of loans.
The good news is that if this is your first mortgage, your credit score dip will not be as bad compared to those who already had previous mortgages. Throw in a mix of cash loans, credit card use and line of credit to see a positive effect on your score.
<img src="&#10;&#10;&#10;&#10;&#10; &#10;&#10; &#10; &#10;&#10; &#10; &#10;&#10; &#10; &#10;&#10; &#10;&#10;&#10; &#10;&#10; &#10; &#10;&#10; &#10; &#10;&#10; &#10; &#10; &#10;&#10; &#10; https://www.letsdiskuss.com/assets/upl_files/5ad19aaa68.png" style="width: 627px;"> Paying on time
Your payment history is 35% of the overall credit score.
Paying your mortgage along with your bills and other loans from a legal <a href="https://cashmart.sg/">money lender on</a> time can help your credit score pick up fairly quickly. As you continue to diligently pay your installments, you will recover your lost scores. 
Length of Credit History
Your mortgage is considered as a new loan that has increased your overall debt. Fortunately, installment loans such as mortgage have a lesser impact than revolving debts (credit cards) since they can increase the length of your credit history. 
Home buyers should not worry about their credit score dropping.
Think of your credit score as money. You need to use it and lose some to get more in life. If used wisely, you will gain more than what you used to have.
Overall, how does home ownership affect credit score?
Unless you buy your home in cash, it is inevitable to get a mortgage. This is how it works:
•	When you inquire for a mortgage, your credit score will decrease.
•	Once approved and the credit bureaus get notified, your credit score will get more dings.
•	Continue paying your mortgage on time to help your credit score recover.
Bottom Line: 
These answers, of course, are based on the basic model of how credit scoring works. Nonetheless, there is a myriad of minor factors that will determine how much score you will lose and how long will it take you to recover. Every borrower’s situation varies. We could have a unique mix of the average age of credit, payment history, the total number of lines of credit, and other financial factors.

Why Buying a House Hurts Your Credit Score

Why Buying a House Hurts Your Credit Score

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