Buying a house can send your credit score down. Here's how long it takes to recover

  • The time it takes for credit scores to bottom is more than five months. The climb back takes just as long.
  • If you take out a new credit card or loan while your score is lower, you could pay a higher interest rate than you would if you wait until your number climbs back up.

The way a mortgage affects your credit score is like a kick in the shin.

You make sure your score is good enough to qualify for a home loan, and then the purchase pushes your number down. That drop averages 15 points, although some consumers can see their score slide by as much as 40 points, according to a new study by LendingTree.

"If you have high utilization on credit cards or other credit lines, and then take a relatively large mortgage relative to your income and credit history, you can have a bigger decline," said Tendayi Kapfidze, chief economist for LendingTree.

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The study analyzed the credit scores of more than 5,000 consumers who took out a mortgage in 2015 and 2016. On average, scores took an average 160 days to hit their lowest point after the purchase of a house and another 161 days to return to their previous levels (nearly 11 months total).

Credit-reporting firms — i.e., Equifax, TransUnion, Experian — consider your overall debt burden as part of their calculation for your number. They also consider how well you've managed past debt, including whether you made payments on time. Generally speaking, the higher your score, the better terms you can get on a variety of consumer debt.

So while your score is reduced after taking out a mortgage, you might face paying a higher interest rate on, say, a new credit card or car loan.

"You might want to wait before taking on other credit obligations, if your score drops," Kapfidze said.

Cities with fastest credit score recovery post-mortgage

City
Average initial credit score
Average decline in score
Total days until recovery
1. Richmond 693 13 266
2. Minneapolis 701 11 267
3. Salt Lake City 704 15 272
Source: LendingTree

It's worth noting, however, that it can take a couple of months after you settle on a mortgage for your lender to alert credit-reporting firms that you have the loan, according to LendingTree.

Credit scores range from about 300 to 850, with scores above 700 considered good or excellent. Someone with a fair credit score that falls between 580 and 669 will pay about $45,000 more in interest over their lifetime on loans and credit cards versus a consumer with very good credit score of 740 or higher, according to separate research from LendingTree.

Cities with slowest credit score recovery post-mortgage

City
Average initial credit score
Average decline in score
Total days until recovery
48. Riverside, Calif. 685 17 375
49. Austin 687 15 377
50. Milwaukee 700 11 384
Source: LendingTree

The national average mortgage debt is $201,811 according to Experian data released earlier this year. However, some states (or local housing markets) come with averages far above that, including Washington, D.C., with an average mortgage debt of $406,035, and California, at $347,652.

In other words, that's a lot of debt to add to your credit report.

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The payoff, though, comes down the road when your credit score recovers and is poised to go higher — assuming you've consistently paid your mortgage and haven't gone hog wild taking on new debt.

"Ultimately it will recover and get better because your mortgage shows other lenders that you're a responsible borrower," Kapfidze said.