increase your credit score

The Top 4 Ways to Improve your Credit Score

When you’re ready to apply for a mortgage, you need decent credit. Good credit gets you the best rate and terms, but even average credit helps you secure the financing you need. If you don’t have average or good credit scores, use these four tips to help you improve it before applying for a mortgage.

Bring your Payments Current

Your payment history makes up 35% of your credit score (the largest portion). If you have even one late payment (over 30 days late), it can damage your credit score considerably. Fortunately, you can correct the situation by bringing all payments current and keeping them current moving forward. The more consistent you are with on-time payments, the faster your credit score will increase. 

Keep your Credit Balances Down

Your utilization rate is the next largest portion of your credit score, making up 30% of it. Credit utilization is the percentage of your credit line that’s outstanding. Ideally, you shouldn’t have more than 30% of each credit line and the total of your credit lines outstanding.

This means you shouldn’t have more than $300 in debt for every $1,000 in credit lines. If you do, see what you can do about paying the balances down. If that’s not possible, consider asking for a credit line increase to decrease your credit utilization rate, but don’t use it or you’ll be right back at square one.

Don’t Apply for New Credit

Every time you apply for new credit, you get hit with an inquiry on your credit report. Each inquiry costs you about 5 points and makes it harder to secure credit. With recent inquiries, mortgage lenders wonder if you have other outstanding credit out there that hasn’t been reported yet since it takes 30 – 60 days for it to show up on your credit report.

Dispute Errors

Errors occur on credit reports all the time. Whether the creditor or the credit bureau made the mistake, it can hurt your credit score. Until April 2022, everyone gets free weekly access to their credit reports. Pull your reports often and check for errors.

If you find mistakes, whether a wrong balance, incorrect payment dates, or a credit line that doesn’t belong to you, dispute it. Do it in writing so the credit bureau has all the information they need to verify what you’re suggesting. The credit bureau has 30 days to respond to your dispute. If they find you are correct, they must remove or correct the information on your credit report.

Bottom Line

Your credit score is the first impression lenders have of your ability to secure financing. Improve your credit score as much as possible before applying for a mortgage. It will give you more options for a mortgage, lower interest rates, and better terms.

Credit scores change every 30 days so there’s plenty of opportunities to fix your credit score and get the loan you deserve. Pull your credit today and see where you stand!

Written by the Mortgage Loan Center.