The Best Ways to Raise Your Credit Score Before Getting a Mortgage
If you want to score the best mortgage terms possible, and maximize your financial future, it’s important to have a strong credit score in place before you apply. But how exactly do credit scores factor into the equation? And what steps can you take to improve your score as you anticipate mortgage applications?
Start by Reviewing Your Credit Reports
The first step in improving your credit is understanding where you currently stand. You’re entitled to a free credit report from each of the three major bureaus (Equifax, Experian, and TransUnion) once a year.
Review your reports carefully for any inaccuracies or outdated accounts. It’s more common than people think to find errors like duplicate entries, payments incorrectly marked late, or accounts that don’t belong to you. Disputing these errors can sometimes provide a quick boost to your score.
If everything looks accurate, your credit report still holds clues about where you can make improvements. Pay special attention to your payment history, credit utilization, and length of credit history, all of which significantly influence your score.
Focus on Paying Down Credit Card Balances
One of the most impactful actions you can take is to reduce your credit utilization ratio, which is the percentage of available credit you’re currently using. Ideally, this number should be below 30 percent, and lower is even better. For example, if you have a total credit limit of $10,000 across all your cards, you’ll want your total balances to be under $3,000. Lenders see high utilization as a sign of risk, even if you’re making minimum payments on time.
Paying down high balances not only improves your score, but also shows future mortgage lenders that you manage your credit responsibly. If paying off large amounts isn’t feasible all at once, even making extra payments or shifting balances to cards with lower utilization can help.
Make Every Payment On Time
Your payment history is the single most influential factor in your credit score. Even one missed or late payment can have a significant negative effect, especially if your credit history is still relatively young. If you’ve had a late payment in the past, now’s the time to build a perfect track record moving forward. Set reminders, automate payments, or use apps that track due dates. Basically, do whatever it takes to avoid slipping up during this crucial pre-mortgage period.
Avoid Opening or Closing Credit Accounts
It’s tempting to open a new credit card to access a promotional rate or close an old account you no longer use, but both actions can actually hurt your score in the short term. New accounts can trigger hard credit inquiries, which slightly lower your score. They also reduce the average age of your credit history, which can impact your standing negatively. On the other hand, closing old accounts shortens your credit history and may increase your overall utilization ratio.
In the months before applying for a mortgage, your best move is to leave your existing accounts as stable as possible. Stick with your current lines of credit and avoid any unnecessary changes.
Consider a Rapid Rescore if You’re Close to Applying
If you’re working with a mortgage lender already and need a quick credit score boost, some lenders offer a service called a rapid rescore. This process updates your credit report more quickly than the standard reporting cycle, typically within a few days, after you’ve paid down debt or corrected errors. It’s not something you can request on your own, but if you’re on the cusp of qualifying for a better rate or approval amount, your lender may recommend it.
Don’t Take On New Debt or Co-Sign Loans
Don’t finance a car, take out a personal loan, or co-sign anything for someone else right before applying for a mortgage. Even if your score can absorb the hit, the new debt affects your debt-to-income ratio (DTI) — a number lenders use to assess how much additional debt you can reasonably afford. A lower DTI not only helps you qualify for a mortgage, but also increases your chances of locking in better terms.
Be Strategic, But Patient
Improving your credit score takes time, especially if you’re working to overcome past mistakes. The good news is that most credit scoring models place more weight on recent behavior than older history. That means the steps you take today will carry more weight than a missed payment from years ago.
Boosting Your Credit Score
In addition to helping you find a better mortgage, boosting your credit score can also save you tens of thousands of dollars over the life of your loan. Even a modest improvement can mean a better interest rate, lower monthly payments, and more buying power in a competitive market.
