Before you were approved for your mortgage, your credit score was an important factor that your lender considered when making the decision to extend you credit. Once you have your mortgage, it becomes an important component of your credit history, credit report, and ultimately your credit score.
If you are like most people, your mortgage is the largest debt you have, and it will affect your credit score for as long as it appears on your credit report. Unlike rent payments, which might not be included in your credit history and credit report, your mortgage is routinely included in your credit history and becomes part of your credit report and credit score.
When you first get your mortgage, you may see your credit score temporarily drop a bit as a result of the credit inquiry and the increase in your overall debt. Making your mortgage payments in full and on time proves your ability and willingness to pay back the loan and helps to increase your credit score. Over time, your history of on-time mortgage payments, combined with responsible use of your other credit accounts (such as charge cards and auto loans), can be very beneficial to your credit score.
Making late payments or missing mortgage payments, even if it happens just once, can negatively impact your credit score and could affect your ability to qualify for new credit. Late payments remain on your credit report for seven years and recent late payments can affect your score more. If you think you might miss a payment or you realize you already missed a payment, it’s important to contact your lender right away to explain your situation and develop a plan to bring your account current as soon as possible. The sooner you pay the past due amount and bring your account up to date, the sooner your credit score can start to recover.