Mortgage will bring down credit score
|  Dear
Dr. Don,
I just purchased a home and the lender said that when you
first purchase a home your credit score will go down and then it will go back
up. Is this true and if so, how long before your score goes back up? Does your
score change dramatically?
-- Sue Scorched
 Dear
Sue,
The lender is right. The reason for the drop in the credit
score is that you just added a new account, the mortgage, to the mix of accounts
on your credit report. It's no doubt the largest account on your report and
it has no payment history attached to it. Once a payment history is established,
your credit score will rise.
I asked Craig Watts, public affairs
manager at Fair Isaac Corporation, to comment on your question. He added this
reason to why your credit score would go down: "In
almost all cases, taking on new credit will cause the person's FICO score to drop
at least slightly because, statistically, taking on new credit increases one's
chances of running into credit problems in the near future." He
also brought up a great point about why you should hold off applying for other
credit while in the process of getting a mortgage. "The
best example I can think of where this can shock a consumer is in the mortgage
escrow process. We've heard of consumers whose FICO score barely qualified
them for their desired mortgage rate, and unfortunately they lower their score
before the close of escrow -- by taking out a car loan for example. When the mortgage
lender checks their score one last time before closing escrow, the lender discovers
that the consumer no longer qualifies for the offered rate. So the loan offer
is withdrawn and the unhappy consumer starts over or settles for a higher rate." Make
timely payments on your new mortgage and your credit score will recover from the
"new mortgage" dip. | 
