How long does a new mortgage normally affect your score?
A mortgage account will affect your credit score for as long as it appears on your credit report. For most people, a mortgage is the largest debt they have on their credit report, so how well you manage that debt will have a substantial impact on your credit scores.
How Will Opening a New Mortgage Account Affect Me?
When you first open a mortgage account, you may notice an initial dip in scores. This is because you have a brand new and large debt on your credit report and no payment history yet to show whether you will be able to manage the debt responsibly.
You may also see a small decrease as a result of the inquiry into your credit report when you applied for the loan. Inquiries remain on the credit report for two years, but their impact is relatively small. And, the longer ago an inquiry occurred, the less affect it will have on credit scores.
Multiple Inquiries for One Application
When you apply for a mortgage, your application will typically be sent to multiple different lenders to find you the best rate and loan terms. The good news is that most credit scoring models count all mortgage inquiries made within a short period of time (usually 14 -30 days) as one inquiry. So, even though you may see multiple inquiries from different lenders on your credit report, they only count as one for the purpose of credit scoring.
Make All Mortgage Payments on Time
Once you begin making payments on your mortgage loan and can demonstrate that you are making all your payments on time and in full, you should see your credit scores begin to trend upwards. As time passes, having a mortgage account that shows all payments made on time can be very beneficial to your credit scores.
On the flip side, one missed payment can have a substantially negative impact on scores and your ability to qualify for new credit. Late payments remain on your report for seven years, and the more recent the late payment, the more it will hurt scores. If you think you might be in danger of missing a payment, don't wait until you are already late. Contact your lender in advance to discuss your options.
What to Do If You've Missed a Mortgage Payment
If you've already missed a payment on your mortgage, it's crucial that you contact your lender as soon as possible to explain your circumstances and come up with a plan. Focus on bringing your account current as soon as possible, but don't lose sight of keeping your other accounts current as well. The sooner you are able to pay the past due balance and bring your mortgage up-to-date, the sooner your credit scores can begin to recover.
Thanks for asking,
Jennifer White, Consumer Education Specialist
This question came from a recent Periscope session we hosted.