10 Tips To Improve Your Credit Score To Buy A Home

Dated: March 15 2022

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10 Tips to Improve Your Credit Score to Buy a Home

10 Tips To Improve Your Credit Score to Buy a Home

Whether you’re thinking about buying your first home, planning on investing in a vacation home, or if it’s just been a while since your last home purchase, it is always a good idea to not only know your credit score, but also how to improve it over time to get the best mortgage rates.

A great credit score will not only get you the best mortgage rates when you go to buy a home, it will also help you get better car loan rates, credit card interest rates, help you save more money over time, and create good spending habits that help you save money and plan for your future. 

Check out our 10 Tips to Improve Your Credit Score to Buy a Home Below:

  • Request Your Free Annual Credit Report- To begin, get your free annual credit report at annualcreditreport.com. Everyone is entitled to 1 free credit report per year and this is the only federally authorized website (aka safe to use, no subscription fee or charges apply).

  • Check Your Credit Report for Errors- Now that you have your free annual credit report, read it over very carefully and check it for mistakes and errors. If you find something that’s a mistake or potential fraud on your credit report, report it by filing a dispute with the credit bureau.

  • Pay Down Credit Card Balances- The amount of your credit limits that you’re using at any given time is called your ‘Credit Utilization Rate’ and it’s considered the 2nd biggest factor in determining your credit score (the 1st one is paying your bills on time). The goal here is to lower your credit utilization rate. The way you can do this is to pay down your credit card balances. A good rule of thumb is to never have a balance that exceeds 30% of your credit card limit (For example, if you have a credit card with a $10,000 spending limit, try to always keep the balance below $3,000). For thebest credit, keep your credit utilization rate at 10% or less.

Credit Utilization Rate

  • Remove Yourself as an Authorized User- If you’re an ‘authorized user’ on someone else’s credit account that’s not in good standing (Spouse, relatives, friends), but you’re not the actual account holder, then be sure to call the credit card company and remove yourself as an authorized user from the delinquent account. Even if you’re not the account holder, being an authorized user on a credit card account with slow or poor payment history will drag down your credit score. **PRO TIP- If you have a spouse or relative with a GREAT credit account, ask them to add you as an authorized user to improve your credit score.

  • Ask for Higher Credit Limits on Accounts with Great Payment History- If you have a credit card account that you’ve made regular payments on and had for a good amount of time, call the creditor and ask for a spending limit increase. The higher spending limit, combined with a lower the balance can increase that credit utilization rate we mentioned up above. *We are NOT advising you to spend more and carry more debt by doing this. This doesn’t work to increase your credit score if you end up carrying more debt because of it. *

  • Deal with Collection Accounts- Having a collection on your credit report is a serious mark that means you could be sued by debt collectors for the balances owed. This can dramatically reduce your credit score. Pay off any collection accounts immediately if they are still showing up on your credit report. If a debt has been written off, you can ask the credit bureau to remove it from your credit report, though this process can take a few months.

  • Pay Your Bills on Time- This may seem like a no-brainer, but you’d be surprised at how many times we hear from our clients that they didn’t realize paying a bill late would decrease their credit score. One client of ours believed it was ok to skip a payment on their credit card on months they didn’t have the budget to pay it, in exchange for a $35 late fee. What they didn’t realize is that in addition to that late payment fee, their credit score was declining as well. Another client thought it was ok to skip a mortgage payment on a home they were getting ready to sell since the loan would be paid off at closing- also a terrible strategy that would drastically lower your credit score! In their defense, nobody had ever explained to the folks how credit scores can drop when you make late payments. Case in point, just pay your bills on time, especially for loans and lines of credit (Think car loans, home loans, credit cards, utility bills, gym memberships, etc).

  • Boost Your Score by Getting Credit for On-Time Utility Payments- A great way to add some points to your credit score is by signing up for a free service like Experian Boost to get credit for on-time payments you make to utility companies and telecommunication companies (Cell Phone Service Payments, Cable Payments, etc). Only do this if you have been paying those accounts on time and have a great payment history. https://www.experian.com/consumer-products/score-boost.html

  • Don’t Apply for Too Many New Accounts- When you apply for a new credit account, this counts as a ‘hard inquiry’ on your credit report and temporarily lower your credit score. A hard credit inquiry can remain on your credit report for up to 24 months. NOTE: Pulling your own credit like we advise above is considered a ‘soft inquiry’ and shouldn’t lower your credit score.

  • Don’t Close Older Credit Card Accounts that are in Good Standing- The length of your credit history is also an important factor in building your credit score. If you have older credit card accounts in good standing, don’t close them. Use them occasionally and pay the bill in full each month to help build your credit.

Earning a great credit score doesn’t happen overnight, but with the tips above, you can not only improve your credit score over time, but also build great spending and budgeting habits. If you’re thinking about buying a home, improving your credit score will make you more likely to be approved for a mortgage loan AND get the best rates. As a reminder, the very best loan rates are awarded to buyers with excellent credit scores. However, there are great mortgage programs out there for first-time home buyers that allow for lower credit scores and still offer competitive interest rates.

Know someone who's working on building their credit or thinking about buying a home? Share this article with them! 

Have questions about the home buying or selling process? CONTACT US today by clicking HERE or calling us directly at (727) 400-3315.

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Andrea Hartmann

Andrea is the Managing Partner of The Sandy Hartmann Group and runs the team alongside Sandy Hartmann. She would love to talk to you about real estate! Andrea was born and raised in the Tampa Bay a....

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