Don't Open a Credit Line if You're Buying a House

Estimated read time: 2 minutes

Applying for a mortgage is a huge undertaking and there is a lot to do when getting your financial house in order. Make sure that your credit is clear and free of errors, and ensure that you have enough income for the monthly payment. Once you have taken care of the basics, we wanted to tell you what not to do before applying: opening new credit accounts.

New Credit, New Issues

In our minds, we think of all the expenses that a new home will bring, and we want the security of a line of credit to help. While you are absolutely correct, applying for this new line of credit before the mortgage is not the right way to approach it. This new line of credit could become a negative mark against you.

Whenever we apply for new credit, there is a small hit to our credit called a hard pull, that could affect your score. On top of that, if you are approved for this new line of credit, you will have opened a new account with a brand new open line. Creditors look at this as a red flag on your credit report.

The red flag comes from a brand new line, with no history, and a large unused credit line. This can be construed as over applying and receiving too much credit. Even if this is not the case, it could affect your credit score negatively.

Stay Vigilant

We know as a future homeowner, you are preparing for the worst and would like that security. What if the water heater breaks down? This is a great question and there isn't anything wrong with getting your line of credit after moving into your new home.

The timing of doing it before your new mortgage (or in the process of securing that mortgage) is what leads to issues. Stay on your current course of long-standing relationships with your current creditors to ensure that your score stays consistent. Double check your credit report and make it as clear as possible for the upcoming mortgage.

Prepare Later For The Future

Once you have sat down with a mortgage broker and finalized terms, you can plan to have other credit sources after the papers are signed. Hold off on making any large purchases right before going in for a home loan. Your monthly payment will thank you.