A common complaint among home owners is why their credit score goes down after buying a house. Usually, everyone is told that buying a house is exciting because your credit score will rise. The month after they move in, they are shocked to see that their credit score has decreased. So, does buying a house lower your credit score? Initially..the answer is yes. Buying a house requires going to a bank to get a loan. To get that loan, a bank has to pull your credit score. Each time this happens, an inquiry is filed on your report; each inquiry placed on your credit report will lower you score by an average of 5 points. When a buyer is house hunting, they’ll usually try a couple of banks to see who will give them the best rates. So, your score is going to go down at first. Though this is unfortunate, its reality. In order for a seller to take you seriously, you must be pre-approved for a loan, and the only way to do that is to have your credit pulled. (Sorry!)
The good news, is that each month you start making your payments (on time, of course) your credit score will increase over time. This is because as a debt is continually paid off, a credit score will rise. If you ever need to apply for new credit, if a lender sees that you have a mortgage and have been making on-time payments for three years, for example, they are likely willing to lend you credit. This is because they view you as a safe candidate for a loan. If you frequently pay your mortgage late, you can be on not getting approved for that new credit card you’re dying to have.
Your credit score is made up of different components. One of those components is determined by the different types of credit you have on your credit report. The more variation you have, the higher your score. So, having a mortgage and a credit card increases your score, whereas only having one type of credit, your score will pretty much stay the same throughout time. So, yes. Your new mortgage will eventually make your credit score higher than it was, as long as you continue to pay off each of your monthly debts.