How Do I Improve My Credit Score to Buy a House? (2024)

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Marlene is a California real estate broker who has been selling property since 1989. California Real Estate License number 01056418.

When lenders begin the process of determining whether or not they will give you a loan, the first thing they do is analyze your credit payment habits. To help them with this analysis lenders order a detailed report of your credit payment history.

Learn strategic tips that may help increase your credit score, and, perhaps help you get the loan you need to buy your home.

There are five main things you can do now to improve your credit score.

1. Pay Your Bills on Time. The longer you pay your bills on time, the more your credit score improves.

2. Pay Down Your Balances. Pay down and keep your balances low on credit cards and other revolving credit. In fact, this is the most effective way to improve your credit score.

3. Only Apply for New Credit if You Need It. Don’t apply for a whole bunch of credit cards just to have them available. All of those credit cards are considered “available” debt. In addition, debt is not a good thing to have when you need to prove that you have the income to manage your current outstanding debt, in addition to the new debt or loan for which you are applying.

4. Do Not Close Unused Credit Cards. Just as you don’t want to go out and apply for many new credit cards, you actually don’t want to close unused credit cards as a short-term strategy. Unbelievably, this could actually lower your score. Why? Because, a portion of your credit score is determined by the length of time you have had and maintained your credit card. If you close a credit card that you have maintained a low to zero balance over a period of, say, 10 years, then you may end up losing some points. Longevity weighs significantly in the credit score model. Longevity shows the lender that you are able to manage debt over a long period of time. Most home loans are for 30 to 40 years, so if you are able to maintain credit card debt for 5, 10, 15 or more years, then the lender may feel confident that you can also maintain a mortgage for, say 30 years.

5. Check Your Credit Score on a Regular Basis. A diligent thing you can do to maintain your credit score is to check your credit report on a regular basis. There may be something on your report which is reported in error, plus, there is a lot of identity theft going on these days and it takes time to sort through it all. You don’t want to be in the process of buying a house only to have the process slowed down because of incorrect information on your credit report.

What makes your credit score worse is late payments. Just simply paying your bills late, even one time, will bring your score down. Some people say, “I pay my bill late, but, I pay it!” Well, having a series of late payments is just as bad as missing payments. Lenders look at that as, “Not paid as agreed.” In other words, if you agreed to have your payment to the lender by the first of every month, but you actually make the payment on the 31st day of the month, then, you have not paid as agreed. Naturally, not making a payment at all is a bad thing, too. And, worse is when your account is sent to a collection agency or if there is a judgment against you that you didn’t pay or even worse than that - a bankruptcy.

When lenders see negative entries on your credit report they automatically assume that if you don’t pay other creditors on time, you may not pay them on time either. So, it does make them hesitate a little when it comes time to loan money to someone with a questionable payment history.

You can obtain your credit score from many sources on the internet. Note that checking your own credit does not lower or affect your credit score.

Some places are free and some charge a small fee. When you go to the web sites, you’ll know up front which are which. Here are some web sites you may want to try for starters.

www.myFICO.com - Fee ranges from $19.95 per month to $39.95 per month for various monitoring services.

www.FreeCreditReport.com - Free Credit Report.

www.CreditKarma.com - Free credit report and free advice to help you improve your credit score.