Getting Ready to Buy a Home? Use These Tips to Boost Your Credit Score
Your credit score plays a major part in your ability to secure a mortgage—and to secure a competitive interest rate on your loan. So, before you buy a house, you’ll want to do everything you can to get your credit score as high as possible.
So how, exactly, do you do that?
Here are a few strategies potential buyers can use to boost their credit score before they purchase a home, including:
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Pay your bills on time: Payment history makes up 35% of your credit score and late payments can have a major negative impact on your credit score, so it's crucial that you make all of your payments on time. To help ensure you don't miss a payment, consider setting up automatic payments or reminders.
- Keep your credit card balances low: Amount of debt makes up 30% of your credit score and high credit card balances can be a red flag to lenders, so it's best to keep your balances as low as possible. Aim to use no more than 30% of your available credit on each card. Less than 10% is even better. You can spread your credit usage across multiple cards, it will not only improve credit utilization but also help in having a good credit mix. Not only should you aim to keep your overall utilization below 30%, you should also look to keep each individual card utilization below 30%. Another tip for improving your utilization is to request an increase to your credit limits.
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Don't close old credit accounts: Length of credit history makes up 15% of your score and closing old credit accounts can hurt your credit score, as it reduces the amount of credit you have available. Instead, try to keep your old accounts open and in good standing. Having a longer credit history can be seen as a positive factor by lenders. Be aware, some lenders will close your account if you don't use their card for an extended period of time. So you may want to break out those older cards and make a small purchase and then pay it off the next month.
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Dispute any errors on your credit report: If you find errors on your credit report, it's important to dispute them as soon as possible. The credit bureau will investigate and correct any errors, which can help boost your credit score.
It's important to monitor your credit report regularly to ensure that the information is accurate and to catch any errors or fraudulent activity. It's also helpful to keep track of your credit score so you can see the progress you are making in improving it. There are a variety of tools available for monitoring your credit, including:
- Credit monitoring services: These services can help you keep track of your credit score and credit report, and notify you of any changes or errors. Some popular credit monitoring services include Credit Karma, Credit Sesame, and Experian.
- Credit score tracking apps: There are many apps available that can help you track your credit score and credit report. Some popular options include CreditWise from Capital One, Credit Karma, and WalletHub Credit Score
- Credit bureaus: You are entitled to one free credit report per year from each of the three major credit bureaus (Equifax, Experian, and TransUnion). You can request a free credit report from each bureau at AnnualCreditReport.com.
- Credit card and banking institutions: Some credit card and banking institutions offer credit monitoring and score tracking as a free service for their customers, so you may want to check with your bank or credit card issuer to see if they offer this service.
Now go forth and conquer that credit score, you credit-score-improving-superstar, you!