Top 5 Ways to Improve Your Credit Score Before a Home Purchase
12/7/2010
If you’re preparing to take out a home purchase mortgage, make sure your credit score is solid. Lending standards are tighter than ever these days, and if you don’t have a strong credit score, you won’t be offered the lowest mortgage rates.
You can repair your credit if it isn’t good enough. Here are the top five ways to improve your credit score before you pursue a mortgage.
1. Pay off current debts. This is easier said than done, of course, but in general, the less debt you’re carrying, the higher your credit score will be. Don’t just transfer debt from one card to another. Your credit score is calculated based on your total debt amount and your total credit amount, so moving debt from one account to another won’t affect your score at all.
2. Don’t open lots of accounts. While it’s true that having a higher total available credit amount can improve your score in some cases, this is a fine line to walk. It’s your payment history that really matters. Opening up new credit lines all the time may make you appear desperate or ignorant.
3. Keep balances low. This is one of the most important aspects of a healthy credit score. Don’t max out anything, ever. It will create the impression that you aren’t good with money and that you aren’t able to make ends meet.
4. Check your credit report regularly for errors. Sometimes credit reporting bureaus make mistakes. Sometimes accounts are left open from previous years that ought to be closed. Check your own credit report often to see how you’re doing and to make sure no mistakes have been made.
5. Pay all your bills on time, always. This is by far the most important aspect of a healthy credit score. One late payment can drop your score a significant amount. Make sure you pay all your bills on time and in full.
These are the top five ways to improve your credit before you apply for a mortgage. But even after you’ve purchased your home, don’t let your credit score slip. If you ever plan to refinance, you’ll need a score that’s just as high. Try to maintain healthy financial habits throughout your life.
