Credit scores are a vital part of getting approved for a loan to buy a home. Although you can get a mortgage with a lower credit score, the better your credit score, the better your loan terms will be. If you’re looking for ways to improve your credit score, look no further. Here are our top tips to improving your score for a better mortgage.
1. Make Payments on Time
Your payment history is one of the biggest impacts on your credit score. The more frequently you pay your bills by the payment deadline, the better your score will be. If you’re behind on your payments, the first step is to get up to date on them.
Then, make sure to continue paying your bills on time and in full, if you can. Either get notifications for when your bills are due or set up automatic payments, so you don’t miss a due date.
2. Pay Off Debt and Keep Low Balances on Credit Cards
Another large determining factor of your credit score is credit utilization, or how much you owe on a credit card compared to your credit limit. Lenders typically look for a ratio of 30% or less. You can positively impact your credit utilization by keeping your credit card balances down or paying off any debt you have on your cards. Calculate your credit utilization here.
3. Only Keep As Many Credit Accounts As Needed, But Don’t Close an Unused Account!
Having a mixture of credit doesn’t necessarily lead to a better credit score. Unnecessary credit can even harm your score by creating inquiries on your account and possibly leading to overspending.
However, if you have an unused account, don’t close it! If the account doesn’t charge you annual fees, closing it could lead to a higher credit utilization ratio.
4. Keep An Eye On Your Credit Report
Make sure to check on your credit reports every so often. If you notice inaccuracies, such as late payments or incorrect amounts owed, these are all factors that can drag down your score. If you notice an inaccuracy, make sure to dispute it right away! Click here for more information on receiving a free credit report.