Good Credit Is Just As Important After Your Home Purchase
Everybody knows how important it is to have great credit when you're buying a house. But keeping your credit good after you've purchased is just as critical. Letting your score take a hit after you close escrow can negatively impact you in a few important ways.
Credit Cards
It's easier than you think to get into trouble with credit cards once you become a homeowner. One late or missed payment is all it takes to get your first ding.
Even if you don't have any credit cards when you buy your home, make your first mortgage payment and watch your mailbox fill up with pre-approval offers. While it might be tempting to get all those cards and charge them up with new furniture and window coverings and TVs and appliances, it might be best to wait. As a new homeowner, you don't yet know what your total monthly nut will be.
Maybe the utilities are way more than you expected. Perhaps your air conditioning goes kaput the first time you turn it on in the spring or your handyman discovers asbestos while scraping the cottage cheese ceilings in your living room. What if rising values in your area means higher taxes for the next year? Delaying some or all of those purchases until you know what you can easily afford can help you stay in good financial shape.
Refinancing
If rates drop after you've moved in or you didn't get the greatest rate to begin with, refinancing might be your answer since it can save you money every month and over the life of your loan. If your credit score has gone up since you purchased, which often happens after a mortgage payment or two, you might be in a good position to refinance. If your credit score has dropped since your lender approval because you took out too much credit or were late on any of your payments, you may not qualify, which would mean sticking with your existing rate.
Another good reason to refinance is lower private mortgage insurance (PMI) rates for those with a Federal Housing Administration (FHA) loan. The lower rates are expected to save homeowners up to $900 per year, according to the U.S. Department of Housing and Urban Development.
Cars, cable, and cell phones, oh my!
The bump in your credit score post-mortgage can help you get a better rate when buying a car, whereas a credit score in decline could mean not qualifying at all. But even smaller purchases and necessary services can be affected by poor credit.
"Cell phone companies run a credit check on you every time you sign up for a new contract," said CNN Money. "The rationale is simple: Wireless companies want to make sure you'll pay your bill. The company "has revealed that 50% of its customers don't qualify for its top promotions."
Utilities like electric and gas as well as cable and satellite may not decline to service your home, especially if they are the only provider in your area. But you may have to pay a higher deposit if your credit is bad—something to consider if you are planning to change to a different provider or plan.
Written by Jaymi Naciri
Nancy M. Alexander Stone Harbor and Avalon NJ Real Estate
