Climbing the FICO Ladder

Raising Your Credit Scores

Does Buying a Home Raise Your FICO Score?

By Therese A. Hartmann

A good credit score is like money in the bank these days. In previous articles we’ve covered what to do to raise your score pre-purchase but what about after the close of escrow?

The short answer is that credit agencies will penalize for mortgage debt initially. Yet, in as short as five months, you’ll get a nice boost to your score as long as payments are made on time. The “boost” is why mortgage debt is considered “good debt.”

Installment credit, like a mortgage, eventually helps your credit history through consistent payments that whittle down the balance. On the other hand, credit card debt can continue to climb, so it is more likely to impact your credit negatively. Here are how creditors consider these various types of debt: • Debt is categorized as “installment” or “revolving” credit

• Installment debt is fixed involving a finite number of monthly payments and include student loans, personal loans and mortgages • Revolving credit has a line of credit that’s open with payments that fluctuate each month to include new charges. Credit cards are an example and they typically don’t have a definite pay-off date.

And now, for some bonus material, here is how long your score is negatively impacted when credit mishaps occur: • Bankruptcy – will take around 6 years to overcome

• Foreclosure – takes around 3 years

• Mortgage late – one is OK but ONLY one in a year

• Closing a credit card account – 3 months recovery

• Applying for a new credit card – 3 months recovery

• Maxing out a credit card – 3 months recovery

The best scenario is to pay off — or down — your credit card monthly, make all payments in a timely manner, don’t max out credit cards, don’t apply for new cards, pay extra principal on your mortgage (and credit cards) and don’t buy something if you can’t afford it.

Check your credit once a year to see what’s been reported and, if erroneous, challenge it. Improve and preserve your credit as part of your financial goals for 2021!

Therese A. Hartmann has 20 years’ lending experience. She is a Licensed Broker, California Dept. of Real Estate #01048403, NMLS # 298291, affiliated with C2 Financial Corporation. For a free consultation, call Therese today at (805) 798-2158.

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