When you get a mortgage to buy a home — and as you pay it down over time — there’ll be some impact to your credit score. Depending on the time frame, your other debt and how you manage your mortgage, your score could increase or decrease.

Key takeaways

  • Getting a mortgage can cause a temporary dip in your credit score. Likewise, consistent, on-time mortgage payments can improve your score.
  • A mortgage can be an important part of your credit mix, along with other forms of debt, like credit cards and an auto loan.
  • Avoid late payments because they'll harm your credit score and stay on your credit report for up to seven years.

Does buying a house hurt your credit?

In the short term, getting a mortgage for a house can cause your credit score to decline, but don’t worry. As you pay your mortgage on time, your credit score can greatly improve over the long term.

“Applying for and receiving a mortgage loan might create a brief and temporary dip in your credit score, as lenders are inquiring about your credit history and as your overall debt increases, but this is nothing to be afraid of,” says Tabitha Mazzara, director of Operations at MBANC (Mortgage Bank of California).

How applying for a mortgage affects your credit score

To qualify you for a loan, many mortgage lenders look at your FICO credit score. FICO scores are calculated by:

  • Payment history (35 percent)
  • Amounts owed (30 percent)
  • Length of credit history (15 percent)
  • Credit mix (10 percent)
  • New credit (10 percent)

To get preapproved for a mortgage, the lender typically pulls your credit report. This registers as a hard inquiry, which slightly lowers your FICO score. The more inquiries you have that aren’t mortgage-related (think a new credit card or a car loan), the greater the adverse impact.

However, if you’re getting multiple preapprovals, credit scoring models group all mortgage-related inquiries made within a certain window into a single inquiry to minimize the impact. Different lenders use different scoring models, which can affect the length of this window. For FICO scores, this window is 45 days. VantageScore — an alternative scoring model accepted by some lenders (such as SoFi) — uses a rolling two-week window. This means multiple applications will count as a single inquiry as long as there are no more than two weeks between each application.

If you’re concerned about changes to your score as you compare loan offers, consider getting prequalified instead of preapproved. A prequalification usually only counts as a soft inquiry on your credit report, so it won’t affect your score, and it can help determine your approval odds, how much house you can afford and the rates you might qualify for. Confirm with your lender whether its prequalification process involves a credit pull — some lenders use the terms “preapproval” and “prequalification” interchangeably.

How having a mortgage affects your credit score

Your score will likely increase over time as you start making timely mortgage payments. Here’s why:

  • Payment history: Your payment history is the most significant factor in your FICO score. When you apply for new credit, lenders typically look at your last two years’ worth of payments. “In the long run, if you consistently make your monthly mortgage payments on time, this will be a serious boost to your credit score, as you’ve proven you can manage this large loan,” says Mazzara.
  • Length of credit history: Most mortgages are longer-term loans, which can benefit your score in terms of credit history length. This component accounts for 15 percent of your FICO score.
  • Credit mix: While less of a factor in your score, your credit mix will also improve with the new type of debt you’ve borrowed. Lenders and creditors like to see a combination of installment loans and revolving accounts such as credit cards. The more diversified your credit profile, the better likelihood of a bump to your score.

If you decide to refinance your mortgage, your credit score could drop temporarily due to another hard inquiry on your report, similar to when you first applied for the loan. It could also dip because you’ll be paying off your existing mortgage with a new one, potentially shortening your length of credit history. However, your score should start to increase again once you begin making payments on the new loan.

How paying off your mortgage affects your credit score

Paying your mortgage off is something to celebrate, but it can impact your credit since you’re no longer managing significant debt and your “mix” isn’t as varied.

“If you have a mortgage, credit cards and an auto loan, for example, and you’re managing them all, that’s a good credit mix,” says Mazzara. “Eliminating the mortgage will decrease the ‘variety pack’ the [credit] bureaus like to see, but the reduction [to your score] should be small — far smaller than the impact of being 30 days late, for example.”

How a mortgage can harm your credit

Life happens, sometimes along with financial hardship. Unfortunately, your credit score will take a significant hit if you miss a mortgage payment, and late payments will linger on your credit report for up to seven years, with the impact diminishing over time. This can make it much harder to obtain credit, including another mortgage, in the future.

“If you are more than 30 days late on a payment, that will dent your score considerably, and a foreclosure will really send it into a tailspin,” says Mazzara. “It’s a very serious matter for the credit bureaus, so avoid this like the plague.”

Be mindful that most mortgage lenders offer a 15-day grace period before assessing a late-payment fee. As soon as you sense trouble with making payments, contact your lender or servicer to discuss your options.

Credit score and mortgage FAQ

  • A mortgage can increase your credit score in the long term if you consistently make on-time payments.
  • Your credit score shouldn’t take more than a year to recover after getting a mortgage, assuming you make all of your mortgage payments on time. Getting preapproved or applying for a mortgage usually only temporarily affects your score.
  • There’s no specific number of points; it depends on many factors, such as how long you’ve had the mortgage, how consistent you’ve been with on-time payments and how much you have left to pay off. On top of that, you might have other factors affecting your score.
  • Ideally, you should refrain from borrowing more until your credit score rebounds so you’ll qualify for the best interest rates. The time it’ll take depends on your current credit profile, but count on at least a year or so. This waiting period also gives existing credit inquiries enough time to drop off your report or otherwise cease impacting your score. It also gives lenders a chance to evaluate how you’re managing your new mortgage.
  • If you take out a second mortgage, your score could drop when you apply and close on the loan. However, it’ll start to climb again if you make timely payments.