There’s a lot of think about before you buy a house. And getting a mortgage can be a stressful part of that process. To make it easier, you should do what you can to boost your credit score.
Having a higher credit score can help you obtain the mortgage you need at the interest rate you can afford. Of course, before deciding to buy a house, you should also calculate what you can afford. Then you can work on the mortgage.
Here are 6 tips to help boost your credit score before you apply for a mortgage.
1. Check Your Credit Report
It isn’t difficult to check your credit report, and you should do it regularly. It’s easiest to get your basic information through a free service such as Credit Karma. But you can obtain more detailed information once a year through your bank.
Within your credit report, you’ll see all the bank accounts, loans, and credit cards you’ve had over the years. Check out some of those older accounts to make sure they’re accurate. If there’s anything you don’t recognize, you should look into it and possibly begin disputing it.
You’ll also be able to see how much of credit you use each month.
Once you know what’s in your credit report, you can more easily understand what you need to do to boost your credit score. You’ll also have a better idea of what sort of interest rate will be available to you on a home loan.
2. Dispute Inaccuracies in Your Credit History
After you’ve reviewed your credit report, you should note any inaccuracies that you find. Disputing problems in your credit history can be difficult and stressful, but it is important to get it cleared up.
Errors in your credit report can range from information errors, such as incorrect address or the spelling of your name, to debts being claimed as unpaid. Whatever the error is, it’s important to get it fixed.
Unfortunately, this is not always an easy process. In most cases, you have to contact each credit service to correct the information in the report.
In the case of an unpaid debt showing up in your credit report, may need to contact the company making the claim. You may be able to resolve the issue with the credit bureau. Be sure that you have proof that the debt has been paid.
3. Keep Your Credit Card Spending Consistent
While you don’t want to spend too much money on your credit cards, it is important to use them. You just have to use them wisely.
It is important to keep your credit card spending low. Your credit score will do better with lower spending than with higher. If you consistently max out your credit card, you will have a much more difficult time improving your score.
No matter how much you spend each month, you should keep it fairly consistent. Large fluctuations can affect your credit score, though only by a few points. Most importantly, is to be able to pay off whatever increases in credit spending you experience.
4. Pay Down Debt
Having some loans can build your credit history. But paying off the debt will boost your credit score even more. If you don’t have debt, you will have a higher credit score and be eligible for better mortgage rates.
As long as you continue making payments on time each month, those debts will decrease and your credit score will improve. If at all possible, pay off those debts a little faster by making more than the minimum payment.
One strategy for paying down debt is to pay off the highest-interest debt as quickly as possible. If you have debt at a low-interest rate, it should be a lower priority to pay off at a faster rate.
If you have a lot of debt for different reasons, you can consider consolidating or refinancing it. Just be aware that there are differences between consolidating and refinancing debt. Either option is not for everyone.
5. Don’t Be Late on Payments
If you have a difficult time remembering when your payments are due, set up automatic payments through your bank. This will avoid ever having a late payment.
When it comes to your credit card or loan debt, you don’t need to pay it off in full each month, but you do need to pay it on time. Sure, it’s better to pay it off in full, but it’s not always expected or practical.
For other recurring bills, such as your rent, electricity, or phone, you need to pay it off in full each month without ever incurring a late fee.
6. Don’t Open New Accounts
While having more than one account can benefit your credit score, new accounts won’t. In fact, having a new credit card account can lower your credit score slightly.
Your credit score is based on the length of your credit history. And a new credit card shortens the average time you’ve held all your accounts. A shorter average age for your credit, your score will fall.
In addition, opening a new credit card account requires a hard pull on your credit. Every hard pull lowers your credit score, though not significantly.
There’s also the temptation to use a new credit card more. When the credit card offers perks for spending a certain amount in the first 90 days, you’re more likely to spend more money. When you use more of your credit, your score will suffer.
Boost Your Credit Score to Buy a Home
Boosting your credit score doesn’t have to be difficult. But it may take some time to reach the level you want to obtain the best mortgage options available.
You’ll likely need to improve your credit score before you buy a house. So you need to know every possible way in which you can boost your credit score. With that added effort you’ll be able to afford the home of your dreams.
When you’re ready to buy your home, you can apply for a mortgage online with our quick application.