How a Mortgage Impacts Your Credit Score
2 minute read
April 28, 2015



Everyone talks about what your credit report should look like before you apply for a mortgage, but no one speaks about what it will look like after you have one. There’s also a common misconception that if you aren’t applying for a mortgage you don’t need to worry about your credit report, but this is untrue. You may still need your report to help you qualify for a car loan, for a job application or for insurance or utility rates. Here are the ways that a mortgage impacts your credit score.

Shows Your Ability to Make a Large Payment on Time

Your mortgage is most likely the largest payment you make every month. You should pay mortgage on time every month. This shows that you can handle the responsibility of making a large payment consistently. This will reflect well when you are applying for an auto loan, having your credit run for a job application or trying to get new utilities or insurance premiums.

Makes Your Credit Report Well Rounded

Part of your FICO score is determined by the diversification of the loan products that you have. A strong credit portfolio will have a mix of revolving, installment and mortgage tradelines opened. Having a mortgage on your credit report adds to your mix in tradelines and will positively impact your credit score.

Defaulting on a Mortgage Causes Serious Damage

The FICO scoring method has  a different way of calculating the risk on late payments. They gauge large secured debts differently than a small revolving account like a credit card. Therefore if you default on a mortgage with a larger payment, it has much more weight than a small minimum payment on a credit card.

Having a mortgage on your credit report can be a great asset in building an even stronger credit portfolio. It can represent your responsibility in handling your finances well over an extended period of time. However, if you default on a mortgage it will severely impact your credit report in a negative way. Allow your mortgage to represent your financial stability and help you to enjoy low rates on any future loans.

If you want to know how mortgage impacts your credit score then feel free to contact us. If you’re looking for a trustworthy and reputable mortgage broker, Aceland Mortgage is here to help.

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