Credit scores are used by lenders to assess how likely you are to pay back the debt.
Written by Northwest Mortgage
Published on Wed, Aug 11, 2021, Last Updated on Wed, Aug 11, 2021
Credit scores are used by lenders to assess how likely you are to pay back the debt. Of course, maintaining your credit score isn’t easy, but it’s the only assurance lenders have. Credit scores typically range from 300 to 850; the higher the credit score, the easier it is for you to attain a loan.
As a young and financially budding person, your credit score is expected to be lower. But that is nothing to worry about because as you progress and change your financial profile, your credit score will increase too. You’ll get many chances along the line to improve your credit scores, and one of them will come in the form of a mortgage.
But make no mistake, there are many ways to top off your credit score, and the best way it to create a credit mix.
Check out any person with good credit scores, and you’ll find diversity there. A good credit report includes car loans, credit cards, and of course, mortgages. Along the way, take every small opportunity to use credit products. A diverse credit report indicates that you can manage all sorts of credits, which increases your chances of getting the green light for a big loan.
How Does a Mortgage Affect Your Credit Score?
A mortgage is almost always a huge amount, and it lasts for years. Now you must be wondering why a mortgage loan always comes with warnings of a hit on your credit score. That’s because it’s partially true, mortgage affects your credit score negatively, but it comes with a silver lining. It’s all about the short-term and long-term impact.
Your credit score does take a hit initially. But, when you continue to pay back your mortgage loan with timely bills, over the years, you end up building your credit score, and by the end of it, you can see a rock-solid increase.
The bottom line is, a mortgage loan is excellent for building your score over the years.
We talked about the negative impact of the mortgage on your credit score, but the good news is that it’s only for a short period and takes only about 5-months of paying back loans in a timely manner to climb that credit score back up.
So, when you apply for a mortgage, don’t be shocked when you see your credit scores dropping. The period of low credit score is temporary. Considering that, then this short period of a low credit score will be well worth it in the long run.
If you’re looking to create some credit mix and get a mortgage in Indiana, reach out to Northwest Mortgage and pick what works best for you.