Nearly a quarter of first-time homebuyers are opening new cards within six months of buying a home, according to a new study.
The study by Realtor.com and Experian, which was released in May but looks at consumer behavior between 2020 and 2021, found that 24.4% of first-time buyers opened a new bank card within the first six months of buying a new home, compared to just 1% of current homeowners.
At the same time, 21.5% of first-time buyers opened a new retail card within the first six months of buying a new home. That could be bad timing for cash-strapped new homeowners, especially with recession warning lights flashing in financial and commodity markets.
About 57% of these consumers also opened a new bank card within two months of closing on a new home. And on average, they opened about 1.55 cards in total.
“‘Opening a new credit card can lead to a temporary drop in your credit score, plus applying for new credit during the mortgage process can make you look like a risky borrower.’”
— Ted Rossman, senior industry analyst at Bankrate.com
So before signing up for a new card, Rossman advises a new homebuyer who’s about to do just that to consider if they can pay their bills in full — with the interest rate averaging at 17.25% — each month.
“Put the interest rate first because you don’t want to pay 17.25% in interest if you’re only earning a few percentage points in cash back or an equivalent amount of airline miles or hotel points,” Rossman said.
And do wait to apply for a new card only after closing on the mortgage, he stressed.
“Mortgage lenders don’t like to see any changes to your credit profile during the underwriting process,” Rossman explained.
“Opening a new credit card can lead to a temporary drop in your credit score, plus applying for new credit during the mortgage process can make you look like a risky borrower. It makes lenders nervous,” he added. “A mortgage is a huge commitment, so don’t do anything (like opening a new credit card) that might jeopardize your approval odds or increase your interest rate.”
(Realtor.com is owned by the same parent company as MarketWatch.)
Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com.
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