Planning to buy a home soon? Your credit score plays a major role in determining the mortgage rates and terms you’re offered. A higher score can unlock better interest rates, lower monthly payments, and potentially save you thousands of dollars over the life of your loan.
If your credit score could use a boost, don’t worry—improving it is possible with the right strategy. In this guide, we’ll walk you through practical, effective steps to help you strengthen your credit profile before applying for a mortgage.
Why Your Credit Score Matters for a Mortgage
Mortgage lenders use your credit score to assess your risk as a borrower. Generally, a higher score means you’re a lower-risk applicant, which leads to better loan offers. Here’s a quick breakdown of how credit scores impact mortgages:
- Excellent (740+): Access to the best interest rates and terms.
- Good (680–739): Competitive rates but slightly higher than top-tier borrowers.
- Fair (620–679): Eligible for many loans, but with higher rates and stricter conditions.
- Poor (<620): May struggle to qualify or face very high rates.
Even a small increase in your score could make a significant difference. For example, improving your score from 660 to 700 could save you tens of thousands of dollars in interest over a 30-year loan.
Step 1: Check Your Credit Reports
Start by requesting free copies of your credit reports from the three major bureaus: Equifax, Experian, and TransUnion. You can get them at AnnualCreditReport.com.
Review each report carefully and look for:
- Incorrect personal information
- Accounts that don’t belong to you
- Late payments or collections you don’t recognize
- Outdated negative information
Disputing and correcting errors can quickly boost your score.
Step 2: Pay Your Bills on Time
Payment history accounts for 35% of your FICO® credit score—the largest factor. Even one late payment can cause a noticeable drop.
To improve your score:
- Set up automatic payments or reminders.
- Catch up on any past-due accounts.
- Stay current going forward—every on-time payment helps rebuild your score.
If you’re struggling, contact creditors to discuss hardship programs or payment plans.
Step 3: Reduce Credit Card Balances
Your credit utilization ratio—how much credit you’re using compared to your limits—makes up about 30% of your credit score.
Experts recommend keeping utilization under 30%, and ideally under 10%, for the best scores.
Tips to lower your balances:
- Focus on paying down high-interest credit cards first.
- Make multiple small payments throughout the month.
- Ask for a credit limit increase (but don’t increase your spending).
Reducing your balances quickly can lead to a faster credit score improvement.
Step 4: Avoid Opening New Accounts
When you apply for new credit, lenders perform a hard inquiry that can temporarily lower your score. Opening multiple new accounts can also shorten your average credit age, another negative factor.
In the months leading up to your mortgage application:
- Avoid opening new credit cards or loans unless absolutely necessary.
- Don’t finance major purchases like cars or furniture on credit.
Keeping your credit profile stable will help lenders view you as a responsible, low-risk borrower.
Step 5: Pay Off Collections and Charge-Offs
If you have accounts in collections or charged-off debts, paying them can improve your chances of mortgage approval—even if it doesn’t instantly raise your score.
Before paying:
- Negotiate a “pay for delete” agreement if possible (get it in writing).
- Make sure the debt is valid and belongs to you.
Some newer credit scoring models ignore paid collections, giving you a better chance at a higher score after resolving debts.
Step 6: Become an Authorized User
Another strategy is to become an authorized user on someone else’s well-managed credit card account. You’ll benefit from their positive payment history without being responsible for the debt.
Choose someone with:
- Long credit history
- Low credit utilization
- Consistent on-time payments
This can add a quick boost to your credit profile, especially if you’re just starting to build credit.
Step 7: Keep Old Accounts Open
The length of your credit history impacts about 15% of your score. Closing older accounts can shorten your credit age and hurt your score.
Unless there’s a compelling reason (like a high annual fee), keep older credit accounts open—even if you don’t use them often.
How Long Does It Take to Improve Your Credit?
Raising your score is not an overnight process. However, depending on your starting point and the actions you take, you could see improvements in as little as 30 to 90 days.
Here’s a rough timeline:
- Quick fixes: Correcting report errors, paying down balances, or becoming an authorized user (30–60 days).
- Moderate improvements: Consistent on-time payments and debt reduction (3–6 months).
- Major improvements: Rebuilding poor credit or recovering from delinquencies (12–24 months).
Use Our Mortgage Tools to Plan Ahead
Once your credit is in good shape, you’ll be ready to start your home search with confidence. Use our free Mortgage Calculator to estimate how much home you can afford based on different credit score scenarios.
Better credit means better mortgage rates—so start improving your score today to unlock the best possible terms!
Final Thoughts
Your credit score is one of the most powerful tools you have when buying a home. By taking proactive steps to improve your credit before applying for a mortgage, you can save thousands of dollars, qualify for better rates, and achieve greater financial peace of mind.
Need more home finance tips? Explore our latest articles and tools at HomeFinanceTools.com!