If you recently purchased a new house, you’ve probably been carefully watching the progress of your credit score, as your rating affects your ability to get a mortgage with lower interest rates. After the purchase of your home goes through, it’s not uncommon for you to experience a credit dip.
Here’s some information from a realtor in Alpine, TX about how you can expect your purchase of a new home to affect your credit score.
Certain factors give a hit to your credit score
You’ll probably start seeing some minor hits to your credit score as soon as you start applying for mortgages with different lenders. Whenever you apply for pre-approval for a mortgage, lenders will perform a credit inquiry to see if your credit is sufficient for them to give you a loan. A hard credit pull essentially tells the algorithm you are actively looking for a new source of credit, which will cause a slight dip in your credit score.
If you want to limit the effect these hard credit pulls can have on your credit score, you should apply for pre-approval with several different companies in a single two-week span. With some credit scoring models you might be able to get away with drawing them out over a longer period of time, but by limiting them to a shorter time period you also limit the hit that your credit score has on you.
Actually opening up a new mortgage will cost you even more points in your credit rating, especially if it’s the first mortgage you’ve ever taken out. There will be a massive increase in debt, which will cause your score to drop. However, by making your mortgage payments on time, you’ll slowly build that credit score back up.
Debt can be a good thing
Keep in mind that adding to your credit mix can actually help your credit profile in the long run. About 10 percent of your credit score is determined by your credit mix, so if you have a greater variety, you’ll actually help your score.
And again, by paying your mortgage on time every month, you’ll start to build your credit score up again relatively quickly. In fact, for many people, it will only take a few months before your score is even higher than it was before you actually started applying for loans!
So, if you see your credit score decrease during and immediately after the home buying process, don’t fret. In the long run, you’ll actually help your credit score so long as you’re able to continue making your monthly payments in full and on time.
If you have any further questions about how purchasing a new home can impact your credit rating, or questions about any other financial issues that might arise as you seek a mortgage, feel free to contact a realtor in Alpine, TX. Get in touch with Carpenter Real Estate today, and we’ll be happy to provide you with any further information you want or need.