Borrowers who apply for a new home loan are on average two to three times more likely to obtain new credit such as an car loan or credit card account over the next 12 months, and many of these same borrowers will open these line of credit as early as one month after getting a new mortgage, according to a new study by TransUnion.

Likelihood of Prime or Better Consumers with a Mortgage Inquiry
to Open the Following Accounts Over the Next 12 Months
All Consumers Consumers with a
Mortgage Inquiry
% of Consumers Who Open a Credit Card 28% 43%
% of Consumers Who Open an Auto Loan 11% 22%

The study had analyzed 16.7 million consumers who paid-off their home loans and moved with new mortgages or refinanced between Q1 2013 and Q2 2015. Transunion found that prime or better risk tier borrowers were the most likely to seek a new mortgage, with 89% of consumers in these credit groups buying a new home, and approximately 85% refinanced their mortgages.

They also found that borrowers who applied for a mortgage on average are over 50% as likely to open a new credit card over the next 12 months following a mortgage inquiry, and three times as likely to open a new auto loan compared to the overall population.

For borrowers who refinance, the study had shown that 71% of all mortgage inquiries occur between 30 and 90 days prior to existing mortgage payoff and new mortgage origination. Also, these same borrowers rack up their credit card, spending at a rate of two to three times in the months prior to obtatining a new home loan.

Monthly Credit Card Spending Trends:
How Much Consumers Spend 1 Month Prior to Payoff Compared to 6 Months Prior to Payoff
Average Increase in Monthly
Card Spend
Those Consumers Who Are
Moving
Those Consumers Who are
Refinancing
General Purpose Credit Cards 1.1 – 1.8X 1.7 – 3.0X
Retail / Private Label Cards 1.4 – 1.7X 1.6 – 2.4X

“Our research found that consumers either purchasing new homes or re-financing their mortgage loans are far more likely to open a new auto loan or credit card soon after this major life event, many within one month,” said Ezra Becker, co-author of the study and senior vice president of research and consulting for TransUnion. “This finding is important, both because it quantitatively confirms the conventional wisdom and because it illustrates how necessary it is to look across products to get the full picture of consumer credit behavior.”

Erik Sandstrom
LoanSafe's Mortgage Expert
I'm a Senior Loan Officer and LoanSafe mortgage expert. If you need a live rate quote, or need help getting a new mortgage, please call me direct anytime at 619-379-8999.