How does purchasing a house affect your credit score?

  • Hello! I am having a hard time finding an answer to this question and am hoping for some insight. I just purchased a house (closed 2 days ago!). The question I have is how will my credit score be affected by making this purchase? I started out with Fair credit (670), which dropped to 655 after the lender inquiries. I qualified and as I said, purchased the house, though at rather alarming interest rates. I do not understand if the purchase of the house will help or hurt me. If it will help, can you give me an idea of the time frame in which I should see improvement (assuming all bills are paid on time, no new credit is aquired, etc), or in the other direction, if buying a house initially hurts a credit score, can you give me a range of about how many points it dings you, and how long it takes to recover from the hit to the score. I feel stupid asking this, but all I can find is info on how to improve your credit score BEFORE you buy a house, not what it does to your score after. Thanks for any help you can provide.


  • Howdy azvalkyrie-ga, I doubt anyone can give you the actual numerical or time impact of your house purchase. The following web page should give you an idea on the general impact of your purchase on your credit rating, and things you can do to reduce that impact. "Dealing with Debt" http://www.solveyourproblem.com/your-credit-score/your_credit_score_and_debt.shtml "Paying down your debts by putting down more than the minimum required monthly payment can help you pay down your debts faster and so can boost your credit score. Paying down more than you need to also shows lenders that you are in good financial shape and conscientious about your debts - two qualities that definitely make you an attractive credit risk to lenders." You should read the page entirely for the details, and if the above page will do as an answer for your question, I will be happy to post it as such. Thanks! Looking Forward, denco-ga - Google Answers Researcher


  • Thank you for responding. I realize that no one can give me a single number that will apply to my particular case. What I am looking for is a general trend: ie will the purchase of a home (in the short term 1-6 months) raise or lower a credit score. I read the page you posted, and it talked about ways to improve your score, but I am rather beyond that having already purchased the house! I know what steps to take to improve my credit, I just want to know if purchasing a house helps or hurts my credit score in the short term (1-6 months). I know it will help as I make payments to the mortgage on time over time, but different kinds of debt effect credit scores in different ways and I am looking for some insight as to how obtaining a mortgage affects a credit score. Does this clarify? I do not want to wait the 6 month to see my score come up with my timely payments, I would like to know if it will help me sooner and that is the info I cannot find for the life of me. If you need any further clarification, I will be happy to do so, or perhaps there is just no answer to my question! Here is an example of what I am looking for: In most cases, obtaining a credit card will initially hurt your credit score, but after about 4-6 months of timely payments and wise usage, it can begin to help your score. Too many inquiries always hurt your score. Student loan debt does not hurt your score when you get it. Does this help? Thanks for helping, I sincerely appreciate it!


  • Howdy azvalkyrie-ga, The web page that I referenced indicates, and logically so, that anything that increases your debt load, that is, the amount of money that you owe, can hurt your credit score. If you have now increased your debt to income ratio to over 35% or so, then there is a very good chance your credit score will go down. This is why the page that I referenced indicates you will want to reduce your debt load, in this case your mortgage, as regularly, and as fast, as possible. Check with your lender about paying down the principle with double, or more payments that go to the principle only. Without a doubt, never be late with a payment, and missing a payment would be horrendous. As long as someone's debt to income ratio is over the "rule of thumb" 35% then the betterment of the credit score is probably going to be slow to come, but it still shouldn't make it impossible to get a credit card. Getting a car financed might be another thing altogether. Looking Forward, denco-ga - Google Answers Researcher


  • Thanks for your help. I am willing to accept this as an answer.


  • Much thanks for accepting this as your answer, azvalkyrie-ga. A reminder of the "Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice." The following web page should give you an idea on the general impact of your purchase on your credit rating, and things you can do to reduce that impact. "Dealing with Debt" from the SolveYourProblem.com website. http://www.solveyourproblem.com/your-credit-score/your_credit_score_and_debt.shtml "Paying down your debts by putting down more than the minimum required monthly payment can help you pay down your debts faster and so can boost your credit score. Paying down more than you need to also shows lenders that you are in good financial shape and conscientious about your debts - two qualities that definitely make you an attractive credit risk to lenders." The web page that I referenced indicates, and logically so, that anything that increases your debt load, that is, the amount of money that you owe, can hurt your credit score. If you have now increased your debt to income ratio to over 35% or so, then there is a very good chance your credit score will go down. This is why the page that I referenced indicates you will want to reduce your debt load, in this case your mortgage, as regularly, and as fast, as possible. Check with your lender about paying down the principle with double, or more payments that go to the principle only. Without a doubt, never be late with a payment, and missing a payment would be horrendous. As long as someone's debt to income ratio is over the "rule of thumb" 35% then the betterment of the credit score is probably going to be slow to come, but it still shouldn't make it impossible to get a credit card. Getting a car financed might be another thing altogether. This CNN Money web page has an interesting points on the above issues, and are applicable before and after getting a loan. http://money.cnn.com/2005/12/01/pf/saving/willis_tips/ "But if that debt is indeed yours, paying your bills on time is one of the most important steps you can take in cleaning up your credit, says Greg McBride of Bankrate.com. That alone counts for 35 percent of your score. Make sure your debt load is not more than 50 percent of your available credit. Allen Fishbein of the Consumer Federation of America says that often people close down their credit cards to decrease the amount of credit they have. But this lowers your credit limit making your debt to credit limit ratio increase." This Debt Negotiation Services web page speaks of the "rule of thumb" 35% to income ratio. http://www.debt-negotiation-services.com/debt-reduction-elimination-articles/debt-to-income-ratio.html "If your debt to income ratio is more then 20% and less then 35%, this situation is still not bad for you. However, you will need to control your debt from now on to prevent yourself from getting into real trouble. If your debt to income ratio is between 35% and 50%, then your financial situation needs a lot of attention." If you need any clarification, please feel free to ask. Search strategy: Google search on: "debt load" "credit rating" ://www.google.com/search?q=%22debt+load%22+%22credit+rating%22 Looking Forward, denco-ga - Google Answers Researcher


    • December 01st 2008 Posted to munchsmadonna.com edit