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How to Increase Your Credit Score to Buy a House

One of the deciding factors when applying for a mortgage is your credit history and score. Lenders and banks will take this factor into consideration when determining whether you’re a candidate for a home loan.

Additionally, this number will influence the rates aspiring homeowners are eligible for when securing a mortgage; the better the score, the better the interest rates.

Increasing your credit score takes time but is well worth the effort when buying a home. Here are some effective ways to increase your credit score to buy a house.

Review Your Credit Report

The first step in improving your credit score is taking the time to understand what’s behind the number. Pull your full, detailed credit report and determine what factors are influencing your score. Some common issues that negatively impact a credit score include:

  • Missed or late payments
  • Collections
  • Hard inquiries
  • Current credit use
  • Credit aging

Understanding your credit report will help you plan your next steps and set priorities for changing your credit score. You might determine that some simple behavior changes will make a positive impact.

Dispute Negative Items

One of the ways of raising the credit score fast is to dispute negative items. If there are negative items that appear fraudulent or past the statute of limitations, then you can request to have those removed.

The dispute process can be tedious as it requires data validation from creditors and the use of traditional mail, but it’s well worth the results.

Keep in mind that disputing negative items is only an option if they legitimately don’t belong on your credit report. For example, if there’s a collections item from ten years ago, it should have been removed already.

If an agency made a hard inquiry on your credit score without your permission, it shouldn’t be on your report.

Create a Debt Payment Strategy

truth for aspiring homeowners
redfin.com

Here’s a hard truth for aspiring homeowners: if you’re struggling with debt already, you should improve that issue before buying a home.

Yes, there’s a strong argument for paying a mortgage that’s equal to your rent payment and investing in your future.

However, there are also a lot of unexpected surprises that come with homeownership and more detrimental consequences if you default on your payments.

Put a debt payment strategy in place to pay down your existing debt. Use a system like the debt snowball or avalanche to guide the process.

Limit Inquiries

One of the subtle actions that have an impact on your credit score is conducting a hard inquiry. In other words, when you pull your credit report with the intention of getting a loan, it adds a negative item for a couple of years.

For example, if you’re shopping around for a vehicle and the dealership runs your credit for financing, that’s considered a hard inquiry.

Limiting hard inquiries in the months leading up to your mortgage application can help improve your credit score. Keep in mind that soft inquiries— pulling your report for analysis, for instance— has no impact.

Make Minimum Payments on Time

create healthy financial habits
nerdwallet.com

The simplest thing you can do for your credit score is to make at least the minimum payment and to make it on time.

It’s important to note that making the minimum payment won’t improve your credit score. However, not making it or being late will make your credit score worse.

At the very least, getting into a habit of making payments on time will help create healthy financial habits that will be useful when managing a mortgage.

Leave Unused Credit Open

Finally, when you pay down your credit, leave the accounts open. One of the factors that impact your credit score is how much you’re approved to use versus how much you use.

As that gap grows, your credit score will increase rapidly.

Use these simple tips to improve your credit score so that you can achieve your dreams of buying a house.

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