How To Boost Your Credit Score Before Buying A Home (2024)

So, you think that you might be ready to consider purchasing a home? Have you found yourself daydreaming about floor plans and home décor, going to Open Houses or reading Pottery Barn magazines and dog-earing the pages of the ideas of things that you like for your new home? Maybe you envision anoutdoor retreatwhere you can enjoy fun-filled evenings and afternoons with your children, family, or friends. Or maybe you envision a playroom for your children, or a well-organizedhome officewhere you can get stuff done. Regardless of what the exact picture of home looks like for you, there is no doubt that home ownership can be a great goal to work toward. But of course, the process doesn’t really begin with choosing your favorite features or picking out paint samples — it typically begins with your credit score.

Credit scoresplay an important rolein the journey to home ownership, and if you are worried that your credit score could derail your financial goals, here’s some good news: There are often ways to improve them and bump them up to assure that, not only do you qualify for a home purchase, but that you get the best rate when doing so. Here are a few suggestions on how to boost your credit score, keeping in mind that everyone’s unique financial situation is different (and that not everyone will see the same results).

Start With Your Three Credit Reports

Did you know that your credit report is available from three different credit bureaus? You should check your credit reports from Equifax, TransUnion, and Experian regularly — and especially when a new mortgage application is on the horizon. Just like you keep an eye on your bank account and credit cards for fraud or mistakes, you should check your credit reports across the three bureaus for the same reasons. There is a fourth credit bureau that most people have never heard of (Innovis), but the top three are the ones that you need to check, because these “tri-merge scores” are used by lenders to qualify you for a loan.

The credit bureaus work hard to make sure that the information on your credit reports is accurate and error-free. TheFair Credit Reporting Act(FRCA) requires them to do so, but the credit bureaus each maintain somewhere around220 millionconsumer credit files so the sheer volume of credit files does leave some room for error (and despite everyone’s best efforts, credit reporting mistakes and fraud do happen).

Thankfully, checking your credit is free and easy. You can claim a free copy of your three credit reports once every 12 months fromAnnualCreditReport.com. Once you download your reports, look them over very carefully for mistakes. If you discover incorrect information, the FCRA gives you the right to dispute items with the credit bureaus. If you do succeed in getting a negative, erroneous item removed from your reports, it could be reflected positively in your credit score, but that takes time.

Pay Down Credit Card Debt

One of the most promising potential ways to improve your credit score— not to mention your financial safety net or ability to save up — is to pay down debt.FICO credit scoring modelsare designed to closely evaluate the debt-to-credit limit usage on your credit card accounts (aka yourrevolving utilization ratio). In fact, a substantial 30% of your FICO® score is largely based upon revolving utilization.

Studies show that consumers who utilize higher percentages of their available credit card limits generally represent a bigger credit risk to lenders. As a result, higher revolving utilization typically correlates with a lower credit score. When you pay down balances on your credit cards, however, you will be utilizing less of your available credit — and your credit score could improve once those new, lower balances appear on your credit report. Now, be careful that you don’t make the mistake that many people do, by paying OFF long standing debt (in good standing). This long term debt (like a credit card that you have had for 5 to 10 years, with an account in good standing) shows a great past history that you have been a good credit risk in the past, and most likely, in the future. Creditors like to see these long standing accounts if they have a positive past history to tell them. Just pay them down, and any cards that are newer, or unnecessary (department store cards) can be siphoned off. And, if you have any unpaid collections, charge offs or medical debts, those should be the first things you clear off your deck. Check into paying down your student loans, too- unless they have very low rates that are less than your other debts. The real key here is to pay DOWN you balances, not to unnecessarily lower your score by removing your goodcredit payment history.

Plan Ahead

When it comes to your credit score and credit reports, things generally take time. If you paid off your credit cards today, it could take as long as a 60 to 90 days before you see it updated on your credit report. Make sure to check back in with the three credit bureaus in a month, and then again, in 60 days, to make sure that the information that was disputed has been successfully removed from all three credit reporting bureau files.

If you disputed a credit reporting error today, it could be 60 to days (or more) before the credit bureaus can complete an investigation. So, the sooner you start, the better off and more prepared that you will be. If you plan to apply for a mortgage, it’s a great idea to get a jump start on checking and potentially repairing your credit as soon as you can- before it impacts or derails the purchase of your ‘dream house’.

If you need additional assistance, your trusted Realtor can lead you to a lender who can do a credit inquiry for you at no charge, and give you some additional ideas on how to reduce your debt therightway, to get you on the road to home ownership- then we will get you fully Pre-Approved, and ready to put an offer on the home of your dreams!

Here’s a great reference if you need some assistance fixing issues found on your credit reports or building up your credit score (Brad can assist nationwide):

Brad Bennett

Crown Family Trust
Credit, Finance, Security & Privacy Solutions

Cell: 704-560-2167
Email: crownfamilytrust@consultant.com

Have any further questions about building your credit or the path to home ownership? Contact us, below: