How Do Mortgages Affect Your Credit Score?

Getting a mortgage can improve your credit score -- but it takes time.

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Your credit score is your ticket to a low interest rate on loans and special perks on credit cards. Getting a mortgage will usually have a negative impact right after you take out the loan, but it doesn't have to ruin a good score. As long as you pay it on time each month, your mortgage can actually help your score over time.


Like any other application for credit, when a lender pulls your credit score because you applied for a mortgage, it results in an inquiry on your credit report. If you apply for multiple mortgages within a short period of time, however, all those inquiries count as just one when figuring your credit score. By contrast, if you apply for four different credit cards in two weeks, your credit score gets docked by four inquiries. But if you apply for a mortgage at four different lenders in a two-week period, only one inquiry affects your credit score. And, after one year, the inquiries have no further impact on your score.

Outstanding Balance

Having a mortgage will make your amounts owed -- which account for 30 percent of your credit score -- go up, which hurts your score. But, it's not nearly as bad as if you owed that same amount on a revolving account, such as a credit card. Plus, as you pay down your mortgage, your credit score improves because you're showing you can handle credit responsibly.

Mortgage Payments

Making your mortgage payments helps your credit score over time because your payment history counts for more than a third of your credit score. As long as you make your payment on time, you mortgage payment will boost your score. However, if you miss payments or fall behind on your mortgage -- or worse, default or get foreclosed on -- your credit score is going to suffer. Late payments and foreclosures stay on your credit report for seven years.

Types of Credit

Having a mortgage will also help your credit score because it increases the mix of credit you use. However, it's only 10 percent of your score and it typically won't have much of an impact unless you don't have much other credit history. In other words, it's not worth getting a mortgage just to boost your credit score.