How To Increase Your Credit Score Before Buying a House

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FACT-CHECKED
Published Dec. 16, 2022
Woman shows man different ways to increase his credit score.

If you want to buy a home, you need to know your credit score. Lenders will review your score when deciding whether to approve you for a home loan, as well as when deciding how much interest you’ll pay. If your credit score isn’t as high as you’d like, here are tips to boost your credit score.

Why You Should Improve Your Credit Score

Your credit score is a major factor in getting approved for a mortgage and determining the interest rate you’ll pay.  

Borrowers with higher credit scores generally get lower interest rates, while borrowers with lower scores get higher rates. Improving your score before you apply for a loan can help you save money on interest. 

Here’s a look at the average interest rate that borrowers were offered for a 30-year fixed-rate mortgage for $216,000 in late November 2022:

Average Interest Rates for a 30-Year Fixed-Rate Mortgage for $216,000

FICO Credit ScoreAverage Interest Rate
760 to 8506.08%
700 to 7596.31%
680 to 6996.48%
660 to 6796.7%
640 to 6597.13%
620 to 6397.67%

Credit Score Basics

Your credit score uses information in your credit report that reflects how well you’ve managed debt, and is calculated using a model such as FICO or VantageScore. Mortgage lenders use credit scores to gauge the risk of borrowers defaulting on loans. Scores range from 300 on the low end to 850 on the high end. 

Credit score minimums for different mortgages will vary.

What Determines Your Credit Score

Factors used to calculate FICO scores include:

  • Payment history (35%).
  • Amounts owed (30%). 
  • Length of credit history (15%).
  • New credit (10%).
  • Credit mix (10%).

8 Ways To Improve Your Credit Score

So, how do you fix your score? Here’s a look at some things you can do to help give your credit score a boost.

1. Dispute mistakes on your credit reports

You can get a free copy of your credit report once a year from Equifax, Experian, and TransUnion — the three major credit bureaus — online at AnnualCreditReport.com. Review your reports for inaccurate information. If you find mistakes, file a dispute with the bureau to have them corrected.

2. Make all payments by their due dates

Your payment history is the most important factor in your credit score. Payments that are at least 30 days late will be reported to the credit bureaus. Establishing a history of on-time payments will improve your credit score.

3. Pay down credit card debt

Carrying a lot of credit card debt can drag down your credit score. Paying down your card balances will help improve your credit score.

4. Become an authorized user

Becoming an authorized user on someone else’s credit account can help increase your credit score. Authorized users are able to make purchases, but aren’t responsible for making payments. If the primary user pays the account as agreed, the authorized user benefits. 

Just make sure you and the primary user understand how the account is to be used, and avoid a high balance that could hurt your credit utilization ratio.

5. Ask your mortgage lender about a rapid rescore

If you have payment information that’s not yet reflected in your credit report, your mortgage lender can pay the credit reporting bureau for a rescore. If you’re in a time-sensitive situation, and have recently paid off debt, a rapid rescore could quickly boost your score.

6. Don’t max out your credit cards

Your credit utilization ratio shows how much credit you’re using relative to how much credit you have. Keeping your credit utilization ratio under 30% shows lenders you only use credit when you need it and are unlikely to max out your cards.

7. Avoid closing accounts before applying for a loan

If you pay off a credit card, avoid the temptation to close the account. Doing so reduces the length of your credit history and the average age of your accounts, which in turn reduces your credit score. 

8. Avoid applying for new credit cards and loans

Applying for a new line of credit results in a hard inquiry on your credit report, and can temporarily reduce your credit score. Opening a new account also decreases the average age of your accounts, which also can hurt your score. 

FAQ

Here are answers to some frequently asked questions about credit scores.

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