How to Improve Your Credit Score Before Buying a House

If you’re planning on buying a home soon, you may be wondering how to improve your credit score. When it comes to getting a mortgage, a great credit score can have a significant impact on your interest rate and mortgage options. As such, doing everything you can to improve yours is a smart decision.

How to Improve Your Credit Score 101: 6 Smart Tips

Whether your credit score is in the gutter or you just want to bring it up ten or fifteen points to impress the underwriter, these six tips can help.

1. Keep Your Credit Card Balances Low

One thing that has a big impact on your credit score is the ratio of your credit limit to how much credit you use. If you can keep this balance below 30%, you’ll be a more attractive borrower.  With that in mind, pay down your credit balances and keep them low.

2. Don’t Carry a Balance

If you can swing it, avoid carrying a credit card balance altogether. Even if you carry small balances on various cards, lenders will want to see that you’ve paid them off if they’re going to give you the best possible rates. Instead of using five different credit cards for small purchases, keep your monthly transactions limited to a single card, and pay it in full every month.

3. Leave Old Credit Lines Open

While most people rush to close credit lines once they’ve finished using them, leaving them open is a smart way to boost your credit report. When you have old, paid credit on your credit report, it communicates to lenders that you’re a responsible borrower who pays his or her balances on time.

4. Consolidate Credit Inquiries

If you frequently apply for credit, it can hurt your score.  There are a few exceptions, though, which include car, mortgage, and student loans. Lenders understand that, while you may submit several applications for these loans, you’ll likely only sign for one loan. As such, they ignore credit requests that come within 30 days of one another.

If you have an additional credit request that falls outside that 30-day mark, though, it may impact your credit score. That said, group your credit inquiries into a single month and be careful about applying for big loans outside of that.

5. Pay All Your Bills on Time

Paying your bills on time is essential to improving your credit score. In addition to establishing a trustworthy lending history, this also helps you ensure the financial security needed to make a large home purchase.

6. Be Careful Not to Indicate Risk

One thing that few people know about credit scoring is that some purchases indicate risk. Say you use your credit card at a pawn shop or divorce attorney, for example. Be mindful about these decisions to get the best score possible.

A Better Credit Score Starts Here

If you want to learn how to improve your credit score, starting with these six steps is a smart decision. Effective, fast, and thorough, they’ll help you boost your score and get the home of your dreams.