How to Improve Your Credit Score for Getting a Mortgage

How to Improve Your Credit Score for Getting a Mortgage

If you are thinking of buying a home, getting your credit in good shape should be a priority. The better your credit is, the lower your interest rates will be. And once you’re locked in to your interest rate, you can start home hunting!

Fortunately, there are many things you can do to improve your credit score and increase your chances of getting good rates on your mortgage. Here are some solutions you should be looking into.

Dispute Mistakes

It takes time to build a good credit rating and, if you’re thinking of buying a home, you really should start taking steps to improve your credit years in advance. However, if you find yourself in a situation where buying a home suddenly becomes a priority, disputing mistakes on your credit report is one of the fastest ways to boost your score.  

To take this step, check your credit reports at all three credit bureaus (Trans Union, Equifax and Experian) and look for any inaccuracies. There may be old debts on your report that have since been paid off or you may be listed as the owner of a high balance account when you’re just an authorized user.

If you find errors, follow the steps to file a formal dispute with the agency. Most issues are resolved within 30 days.

Pay Your Bills on Time

The best way to maintain good credit is to pay your bills on time. If you have a history of being delinquent on bills, it may take a while before reversing this trend boosts your credit, but in time you will see those numbers begin to rise.

Keep Balances Low on Credit Cards

Credit card debt plays a major role in your overall credit score. However, having some credit card debt is not necessarily bad, as long as you are keeping up with your payments to keep your credit utilization ration low.

Your credit utilization ratio is determined by looking at your credit limit across all your cards and comparing it to your average amount owed. For instance, if you usually charge $2,000 each month and your credit limit across all your cards is $10,000, your ratio is 20%.

Lenders typically like to see a ratio of 30% or less.

You maintain low ratios by keeping up on your credit card payments. Becoming an authorized on another person’s account will also help, as long as that person uses credit responsibly.

Also, if you have unused credit cards that are not costing you anything in annual fees, leave the accounts open. This will counter your debt to make your credit utilization ratio lower.

Don’t Apply for New Credit

Every time you apply for new credit, it will result in an inquiry on your account.  Each inquiry will negatively affect your credit score. Before applying for new credit, think carefully to decide if doing so is really necessary. You want to be especially careful if you are thinking of buying a house or making any other major purchase.

Buying a house takes a lot of preparation. Raising your credit score is one of the most important steps you can take. Use these tips to get your credit in the best shape possible so you can enjoy low interest rates for years to come.