Raising Your Credit Score: Steps to Take Before Applying for a Mortgage

Purchasing a home is a significant financial investment, and having a good credit score is an important factor that lenders consider when evaluating your mortgage application. A higher credit score can help you get better interest rates, lower monthly payments, and increase your chances of being approved for a mortgage. Check out some tips below that we have put together for you to help boost your credit score before applying for a mortgage. Let’s get you ready for your dream home!

✅ Review Your Credit Report

The first step in improving your credit score is to get a hold of a copy of your credit report. You are entitled to a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year.

Review your credit report for any errors, and dispute any incorrect information with the credit bureau. Errors can occur on your credit report due to a variety of reasons, such as incorrect information being reported by a lender, identity theft, or simple clerical errors. If these errors are not corrected, they can have a significant impact on your credit score and your ability to get approved for a loan or credit.

While this may not be a fun process, it’s critical to protecting yourself and future investments!

✅ Pay Your Bills on Time

Payment history is one of the most important factors that will affect your credit score, so make sure to pay all of your bills on time. Late payments can lower your credit score and have a negative impact on your credit history. Lenders view on-time payments as a sign of financial responsibility and trustworthiness. By consistently paying your bills on time, you demonstrate to lenders that you’re capable of managing your finances and are less likely to miss payments on a mortgage or other loan. And, on the flip side, late or missed payments can indicate financial stress and poor money management skills, which can lower your credit score and make it more difficult to get approved for a loan or credit.

Set up automatic payments or reminders to help ensure that you never miss a payment!

✅ Pay Down Debt

High levels of debt can also have a negative impact on your credit score. Focus on paying down your debt, starting with the accounts that have the highest interest rates. By paying down debt, you can increase your credit utilization ratio, which is the amount of credit you’re using compared to your available credit. Sit down, make a plan, and start hammering out that debt!

✅ Keep Old Credit Accounts Open

The length of your credit history is another factor that affects your credit score. Keeping old credit accounts open can help to increase the length of your credit history and boost your credit score. It shows lenders that you have a long history of responsible credit usage and are less likely to miss payments or default on a loan.

✅ Limit New Credit Applications

Every time you apply for credit, a hard inquiry is placed on your credit report. Hard inquiries can lower your credit score, so try to limit the number of new credit applications you make. By limiting the number of new applications, it reduces the number of hard inquiries on your credit report and demonstrates financial stability to lenders. Excessive applications can indicate financial distress, and that’s what you want to avoid!

✅ Use Credit Cards Wisely

Using credit cards responsibly can help to improve your credit score. Try to use your credit cards regularly and pay off the balance in full each month. This will help to increase your credit utilization ratio and show that you’re a responsible borrower.

In conclusion, boosting your credit score before applying for a mortgage is an important step in the home-buying process. By following some of these tips, you can increase your chances of getting approved for a mortgage and secure a better interest rate and lower monthly payments. Taking the time to improve your credit score now can also help to ensure that you’re in a good financial position for the long term.

As always, if you would like to talk to any of our trusted realtors, or if you would like to see what home options are on the market to get a feel for what’s out there (and maybe to get you really motivated!), click here to get in touch with us.