Mortgage borrower credit scores take nearly a year to recover
Mortgage borrower credit scores hit their low points more than five months after making a home purchase, but lender reporting cycles also cause these results to vary, according to a LendingTree study.
While consumer scores typically recover, they drop an average of 15 points and take about 160 days to hit lows. The average complete decline and recovery cycle is 11 months.
While lenders usually start reporting consumer scores to credit bureaus after the first month's payment, it may take about 60 or more days post-closing for a home purchase to show up and affect a credit score, with lender reporting cycles also causing varying results.
Once scores recover, they are typically poised for growth as consumers make timely payments and as a home purchase helps show diversity.
After buying a house, borrowers of different housing markets experience varying credit score decline and recovery times.
Homebuyers in Milwaukee saw credit scores drop for an average of 191 days, marking the longest period of decline out of the nation's 50 largest cities. In contrast, purchasers in New Orleans saw post-closing scores decrease for the least amount of time on average, at 133 days.
Credit scores fell the most for homeowners in Virginia Beach, Va., where they dropped 20 points on average, and the least for buyers in Minneapolis, where they only dipped 11 points.
To determine how home purchases affect borrower credit scores, LendingTree used its MyLendingTree platform, which provides consumer scores and credit monitoring, to analyze over 5,000 consumers who bought homes between 2015 and 2016.