How the mortgage loan application affected my credit score
There was a time in my life when I had a perfect credit score, and while I didn’t plan on having one these days, at the time I did this. that I was able to keep that number at 850. That meant paying all of my bills. on time and without applying for new credit cards that I didn’t need.
But when my husband and I decided to buy a house together about 12 years ago, we needed a mortgage to make it happen. I knew my credit rating would take a hit. Fortunately, however, this blow was not great at all.
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A minor drop in credit score
When you apply for a new loan or credit card, the lender or issuer should verify that you are a sufficiently responsible borrower to get approved. It means pulling your credit report. When this happens, it is a serious investigation and it can lead to a temporary drop in your credit score.
This is what happened to me when I applied for a mortgage. At the time, my credit rating was not perfect, but it was very close. I remember being disappointed that my mortgage application dropped by around five points. Even though my score was still well over 800 and this hit was minor, at the time I was disappointed.
At this point, however, a five-point credit score drop wouldn’t bother me at all. Because my score is high, a minor drop will not make me ineligible for a great rate on a loan or new credit card.
In fact, last summer my husband and I decided to refinance our mortgage because the rates were so good. My credit score dropped about seven points in the process, but that really didn’t matter.
Don’t stress over a small drop in your credit score
If you are considering applying for a mortgage (or refinancing your mortgage), you should be prepared for your credit rating to drop slightly as lenders pull your credit report to decide if you are a viable candidate for it. borrowing or not. But you shouldn’t worry about it either.
In the long run, having a mortgage could actually help improve your credit score. If you regularly make your monthly payments on time, this will be reported to the credit bureaus. A solid payment history is the most important factor in determining what your score looks like.
Having said that, it is common to look for a mortgage loan from different lenders. If you go this route, try to shop for tariffs in the same 14-30 day period.
If multiple lenders pull your credit report in a short period of time, all of those inquiries will count as one, resulting in minimal impact on your credit score, in the sense of what we just discussed. But if you spread those mortgage applications over too many weeks, you could end up with several difficult inquiries – and more of a drop in your credit score.
Of course, having a good credit score is important when applying for a mortgage. A score in the top 700 or more might be what it takes to get the best mortgage rates. But if that’s where your score is, don’t worry about a five or seven point drop in getting a home loan.