Lenders prefer that borrowers have a permanent residence as a point of contact. But at some point in your life, you will probably move. In this case, you might wonder, does changing your address affect your credit score? Changing homes has no direct impact on your credit score, but changing your address might have a ripple effect.
How changing your address can affect your credit score
Does changing your address affect your credit score? Not directly, but here are a few situations where an address change might impact your credit score. Let’s see how.
Bills can get lost if you haven’t updated your new address
If you fail to update your address, you could still get bills sent to your former address. If they go unpaid, they would affect your credit score.
Hard inquiry from a credit check
A hard inquiry occurs when a lender requests to look at your credit file. This activity usually happens when you apply for a new line of credit, such as a credit card or mortgage. Lenders do this to check your credit history and determine your creditworthiness.
A hard inquiry usually only affects your credit for a few months, though it stays on your credit report for two years. However, too many hard inquiries within a short period send a red flag to lenders because it seems like you are frequently looking to borrow money.
Putting moving expenses on credit
Regardless if you are moving locally or across states, changing addresses can be expensive. However, a more expensive way is funding your relocation with a credit card, because of its high interest rate. When you add large expenses such as relocation costs to your credit account, your overall debt increases, which ultimately lowers your credit score.
Do you need to notify credit bureaus when you change your address?
You do not need to update your address with credit bureaus provided you have an open credit account. What you should do is notify your lenders that your address has changed. Your lenders would in turn update the address on your accounts, which would then be reported to the credit bureau. Lenders usually update accounts after the end of a billing cycle, so you should allow between 30 to 45 days for the new address to be reflected on your credit report.
How to change an address on your credit report
If you need to update your credit report address, submit relevant documentation to any of the credit bureaus showing proof of your new address. This documentation could be a copy of any utility bill or bank statement along with an identification card. The credit bureau would then change the address on your credit file.
Factors that do impact your credit score
If you change addresses with a credit bureau, your credit score may not be affected directly, but other factors could put a dent in your score. Let’s have a look at some of them.
Payment history
Payment history makes up 35% when calculating your score. Your track record of payment is evidence of how creditworthy you are. Lenders like to see that you are consistent with payments. If you have frequent missed payments, your credit score suffers.
Outstanding debt
The amount of debt you owe tells lenders your existing liabilities, which allows them to judge your ability to repay the loan you are applying for. It also determines the amount of loan they would be willing to offer you. Outstanding debts make up 30% of your credit score calculation. If your outstanding debts are huge, they cast a shadow of doubt on your capability to repay the loan since you have existing debts. As such, your credit score may drop.
Credit history
Credit history accounts for 15% of your total credit scores. A longer credit history is good for credit score calculations because it shows lenders how you have been managing loans and debt over time, enabling them to analyze your financial habits and ability to pay back loans.
Credit mix
A credit mix refers to the types of accounts (mortgage, credit card, student loan) that make up your credit report. It accounts for 10% of your FICO score. A credit mix provides lenders with a more comprehensive view of your credit history because it shows how you can manage different types of credit.
New credit
Applying for new credit can hurt your credit score because it reduces the average age of all your accounts. This factor reduces the length of your credit history and subsequently, your credit score since a long credit history boosts your credit score.
Move, don’t snooze on your credit score
Changing addresses cannot directly hurt your credit score. However, if you snooze, relocating could do your credit more harm than good. To keep your credit from being damaged by your upcoming move, pay all outstanding bills in your former place of residence. Try to avoid getting too many hard inquiries in a short period.
Also, make sure to update your new address with credit bureaus. Finally, because credit cards charge high interest rates, try avoiding putting hefty payments like moving costs on your credit card. If you can’t pay off what you’ve charged, it would cost you more in the long term.
FAQ
If I change my address, will this affect my credit score?
No, changing your address does not affect your credit score.
Can previous house owners affect my credit score?
No, because credit checks are done to determine your creditworthiness, which has nothing to do with where you live.
Can the people I live with affect my credit score?
Provided you are not associated with them financially, for example co-borrowers of debt, the people you live with can’t affect your credit score.
