Home Mortgage 4 Credit Score Tips for Aspiring Home Buyers

4 Credit Score Tips for Aspiring Home Buyers

by Joshua Garcia

Buying a house is a significant financial undertaking, and it’s only natural to want to reduce costs wherever possible. One key factor that affects mortgage rates is your credit score. Therefore, focusing on improving your credit score is a smart move if you’re considering purchasing a home.

It’s essential to understand that even if you believe your credit score is “good enough,” recent mortgage rates might surprise you. According to Freddie Mac, the current average rate for a 30-year fixed-rate mortgage loan is 7.19%. This means that lower rates are available, especially if you have a strong credit score.

To ensure your credit score is in good shape before diving into the housing market, here are a few tips to consider:

1. Recommit to making on-time payments: Your payment history accounts for a significant 35% of your FICO® Score. Commit to making on-time payments every month, as this shows lenders that you are responsible with your financial obligations. Consider using a wall calendar to keep track of your bill due dates or set up automatic bill payments to avoid forgetting.

2. Check your credit report before a lender does: As part of the mortgage application process, lenders closely examine your credit report. Stay ahead by obtaining your credit report before they do. You can access a free copy of your credit report each week until the end of the year. Review it for any errors or outdated information that could be negatively impacting your credit score. By addressing these issues, you can improve your score.

3. Pay down existing debt: Although you may be taking on a mortgage loan, reducing your credit card debt can positively impact your credit score. This is especially important before applying for a mortgage. Additionally, having less debt can make it easier to manage a new homeowner budget. Consider taking on a side hustle to generate extra income, which can help pay down debt faster.

4. Avoid financial changes during the mortgage process: Once you have applied for a home loan, it’s crucial to maintain your financial stability. Avoid making significant changes, such as applying for new credit cards, financing large purchases, or switching jobs. These actions can alter your debt-to-income ratio and make lenders wary. If you want to make purchases for your new home, wait until after your mortgage has closed.

Buying a home can be a stressful experience, especially in a difficult market. However, by focusing on improving your credit score, you can alleviate some of the worries associated with the home-buying process. By committing to making on-time payments, reviewing and correcting errors on your credit report, paying down existing debt, and avoiding financial changes during the mortgage process, you can position yourself for the best possible mortgage rates and terms.

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