How to Get a Mortgage Without Ruining Your Credit

Purchasing a home is a lengthy process. You'll need to put money aside for a down payment, look for the ideal home, and figure out how to get a mortgage. That's a lot to take on for anyone, but you also have to consider how all of these decisions will affect your credit score. Shopping for a house and applying for a mortgage can have a negative impact on your credit, but it doesn't have to. Let's look at how shopping for a mortgage will affect your credit score and what you can do to mitigate the damage.

How Does Shopping for a Mortgage Affect Your Credit Score?

The process of looking for a mortgage isn't difficult once you get started. You locate a lender (or two or three) and complete an application. The lender will then verify your eligibility and qualifications. Checking your credit score is one of these steps. Your credit score is a three-digit number those lenders use to determine your likelihood of paying bills on time. The ranges vary, but 670 to 739 is considered a good credit score. Equifax, Transunion, and Experian are the three major credit bureaus. Each of these bureaus will have its own version of your credit score, and slight differences between them are to be expected. A hard inquiry appears on your credit report when a lender checks your credit score. Hard inquiries can lower your score, particularly if you have too many. But don't panic—the drop is usually only temporary and won't make a significant difference in the long run. When looking for a car loan, mortgage, or other similar loans, several inquiries made in a short period of time are grouped together and treated as a single hard inquiry. Most of the time, if the inquiries are made within 45 days of each other, the impact on your credit score will be minimal. There will be more on this later.

Examine Your Credit Report

To understand how to safeguard your credit score, you must first understand what it is. This is a great idea for a variety of reasons. To begin, you'll be able to see if your credit score qualifies you for a mortgage. Lenders are hesitant to give loans to people who have bad credit or no credit history. Tip: There are several websites where you can check your credit score for free. Through 2026, you can also get a free credit report up to six times a year. It is critical to check your credit report regularly. Credit bureaus don't always report accurate data, so if something on your report is incorrect, you should dispute it. Incorrect information, especially negative information, can harm your credit score.

Prequalification should be considered

If you're looking for a mortgage, you might want to consider getting prequalified. This is a good option when you're unsure if your credit score is good enough for a mortgage. Prequalification entails a lender conducting a basic review of your information and making an offer (or not) based on their findings. Warning: It is possible to go through the prequalification process without a hard inquiry affecting your credit score, but you must confirm this with your lender on a case-by-case basis. Ask if they'll use a soft inquiry, which has no bearing on your grade. Keep in mind that if you decide to proceed after prequalification, you'll still need to complete a hard inquiry.

Keep Your Credit Score in Check

You'll want to keep track of your credit score while looking for a mortgage once you've determined it. This will help you get the best rates and the best approval chances. We asked John Cabell, director of banking and payments intelligence at J.D. Power and Associates, for advice on maintaining a high score.

Debt Reduction

Cabell advises paying off all outstanding debt as soon as possible if you want to improve your credit score. Before applying for a mortgage, ensure you've completed this step. The debt-to-income ratio is used by banks to calculate the amount of credit you are eligible for.

Pay Your Bills On Time

As previously stated, on-time payments account for a portion of your credit score. One missed payment can have a major impact on your credit score.

Getting New Credit Cards or Loans Isn't a Good Idea

According to Cabell, before applying for a mortgage, you should avoid taking on any new debts, such as new credit cards or loans. It may take several weeks for changes to appear on your credit report after you do so. When you apply for and receive a loan or a new card, several things happen: You'll experience a new hard inquiry, a decline in the average age of your credit, an improvement in the composition of your credit, and a reduction in your overall credit utilisation. Note that while a better credit mix and lower credit utilization are both beneficial in the long run, your bank will need to verify any new accounts you've opened, which will take additional time.

Your search should be limited to 45 days or less

Banks will treat multiple inquiries within a given period as a single inquiry, as we mentioned earlier. Take advantage of this by comparing rates from a number of different lenders. Please make sure they're all within 45 days of one another. "The impact on your credit is the same regardless of how many lenders you consult, as long as the last credit check is within 45 days of the first credit check," the Consumer Financial Protection Bureau (CFPB) says. This is because anyone looking at your credit score now or in the future will notice that you are only going to buy one home, not the number of homes represented by those inquiries. However, according to Cabell, there are some—albeit rare—circumstances in which extending your loan application beyond the standard 45-day period may be a good idea. "Unusual circumstances may cause a months-long application process to delay your ability to make payments and improve your credit score," he said. Note: According to the Consumer Financial Protection Bureau, the additional impact on your credit score from shopping around for a lower mortgage rate beyond that magical 45-day window may be worth the money you save in interest in some cases.

Most Commonly Asked Questions (FAQs)

What are the current interest rates on a mortgage?

Mortgage rates vary depending on many factors, including your location and the type of loan you seek. Check reliable sources for current mortgage rates, such as the Consumer Financial Protection Bureau.