By itself, the act of buying a house will not affect your credit score. However, to buy a house, most people need to take out a mortgage. A mortgage is a large, secured debt. In the short term, a large debt can hurt your credit score. However, in the long run you can actually improve your credit history dramatically simply by making your mortgage payments on time.
Credit Scores
A credit score is a summary of your borrowing and repayment activity from the past seven years. The actual formula used to figure out the score is secret, but the data that is used in the calculation is not. Approximately 35 percent of the score is your repayment history. Another 30 percent is the total amount you owe. A further 15 percent is the length of your credit history. The remaining 20 percent is split between new credit applications and the types of credit you use. All of this information is converted into the three-digit number that is your credit score.
Multiple Scores
When talking about your credit score, you should be thinking about three numbers, not one. Each of the three major credit bureaus -- Experian, Equifax and TransUnion -- issues its own credit scores. The ranges for the scores are slightly different, as are the formulas used to calculate them. However, if you have a low score with one credit bureau, you will have a low score with the others. You should only worry about the difference in the scores if you are on the border between an average and a good credit score. In that case, you may want to apply for credit with lenders that use the bureau that gave you the best score.
Mortgages and Credit Scores
When applying for a mortgage, most people want to shop around. Multiple credit inquiries can hurt your credit score. However, lenders know that buyers like to compare offers before committing to such a large debt. Therefore, all credit inquires made in the 30 days prior to taking out a mortgage count as a single inquiry. A single inquiry will not hurt your credit score. Borrowing hundreds of thousands of dollars can temporarily lower your score. However, as it is a secured debt, a mortgage will not count against you as much as an unsecured loan.
Raising Your Credit Score
The biggest factor in calculating your credit score is your repayment history. Lenders like to see that you are a responsible borrower who will repay your debts on time. You can use your mortgage to improve your credit score simply by making all of your payments on time. If you can pay more than the minimum, you may be able to clear your debt sooner. However, as far as your credit score is concerned, it's enough to pay the minimum amount, as long as you do it by the required date.
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