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How Mortgage Affects US Credit Rating

Photo: depositphotos

Photo: depositphotos

If you are going to buy a house, you will most likely be interested in your credit rating, which affects the possibility of obtaining a loan, as well as the interest that you will pay on it.

We offer you data about what is happening with your credit history, after you have received a loan to buy a house, collected by the publication С

Credit requests lead to loss of points

As soon as you apply for a mortgage loan, your credit rating will decrease slightly. This is due to the fact that after your request for a loan, the lenders will begin to check your credit history, making the system know that you are looking for a new loan, this usually leads to a withdrawal of several rating points.

You can reduce this effect by contacting several mortgage companies with a request to pre-approve the loan within 2 weeks. Some companies may offer you a longer search period, but it is better to stick with the 2 weekly period. When you limit the search period for a loan, you still lose credit score points, but in a smaller amount.

New loan takes even more points

Requests for a loan lead to the loss of a small amount of credit rating points, but a new loan will cost you even greater loss of rating, especially if this is your first mortgage. A substantial increase in the amount of debt will definitely lower your credit rating.

Fortunately, secured loans (buying a home or a car) lead to a smaller loss in rating than withdrawing money from a credit card.

Photo: depositphotos

Photo: depositphotos

Adding a new type of loan has a positive effect on the rating.

Despite the loss of several rating points when you receive your first mortgage, expanding the types of loans in your history, adding a home loan to them, has a positive effect on the rating. The greater the variety of your loans, the better the rating.

After a fall in the rating due to applying for a loan and getting it, the number of points in your credit history will increase again due to the expansion of the types of loans you take.

Payment of the loan on time will improve your rating

If you make mortgage payments on time, your credit rating will start to grow rapidly. After a few months of payment without delay, your rating will be higher than it was before you applied for a mortgage.

Thus, obtaining a loan to buy a house will temporarily lower your credit rating, but after a few months, if you demonstrate your financial responsibility, the rating will noticeably increase.

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