FICO scores are credit scores that are based on five categories: payment history, amounts owed, length of credit, new credit applications and types of credit used. Though there is no set amount by which a credit score rises or falls when a mortgage is used, how it affects the five factors can give you an idea of how it will affect your score.
Payment History
A mortgage is one more opportunity for you to show that you are able to consistently make your monthly payments on time. If you do so, your score will increase. However, if you miss payments or are foreclosed on, your credit score will drop.
Amount of Credit Owed
Your credit score will be negatively affected by the large amount of money that is added to your balances owed when you take out a mortgage.
Length of Credit
As you pay off your mortgage, your credit history will lengthen, increasing this section of the score. However, if you do not make payments as agreed, your credit history will be filled with negative information.
Applications for New Credit
By having several lenders request your credit score, as would happen if you applied for multiple mortgages, your credit may suffer because of the number of inquiries on your credit report. However, FICO takes into account that people shop around for a mortgage by counting all mortgage inquiries made in close proximity to each other as one inquiry.
Types of Credit Used
If you have not had a mortgages before, this section if your score will increase because you have diversified your use of credit. Using multiple types of credit makes you look like a better credit risk to lenders.
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