Raising your credit score can help you qualify for a mortgage and secure a better mortgage rate. And for many people, making a few financial adjustments can raise their FICO score, resulting in a lower mortgage rate that saves hundreds of dollars every month.
#1 Correct Mistakes on Your Credit Report
Lenders use your credit report to determine how much money to lend you for a home, and how much interest to charge you for the loan.
So it’s important that you regularly monitor your credit report, review it carefully, and correct mistakes. Just 1 mistake on your credit report could cost you thousands every year in additional interest on your home loan.
#2 Increase the Amount of Credit Available to You
The easiest way to raise your credit score is to increase your credit limit, which will reduce your utilization ratio. Depending on your circumstances, this could raise your credit score.
To accomplish this, you can either apply for another credit card or ask a current credit card provider to increase your credit limit. If you have a stable income and have made monthly payments on time, you shouldn’t have a problem increasing your credit limit.
#3 Pay Down the Balances on Your Credit Card
Paying down your credit card balances can help you increase your credit score, as a large portion of your score is determined by the percent of available credit that you are using. Ideally, you want each card balance to be under 30% of the total limit while also keeping your total credit usage to less than 30% of available credit.
A utilization ratio under 30% tells lenders you can manage credit responsibly.
#4 Settle Past Due Debts
Roughly one-third of your credit score is determined by your ability to make payments on time. If you have any payments that are 30 or more days past due, paying these debts will improve your credit score over time.
If you cannot pay the debt, but make arrangement to pay the debt, it could be structured with some creditors to show that you are current on your payments. This could have a huge impact on your credit score and help you qualify for a better rate on a home loan.