Your credit score has the potential to determine the result when it comes to big purchases like a home. Often times, without a good score – typically in the 700s or higher – you’ll face higher interest rates on a loan.
While a credit score can’t be corrected overnight, there are a few ways to help push it in the right direction.
Paying down your credit cards can significantly help in the long-run. When your credit is under review, lenders will be looking at your history, balances and trends. If they can see that you’re making an effort to pay off debts, it’ll improve your chances of being approved.
Review and Reconcile
Before applying for a mortgage, pull a copy of your credit report. It’s important to review the report to ensure there are no discrepancies. If you find any mistakes, you can submit a dispute to have it removed from your credit report. Keep in mind that disputes can take anywhere from a few weeks to a few months – depending on the error. Major companies, such as Equifax and Transunion, offer dispute forms.
Plan and Pay
Once your debt decreases, make sure you continue to pay down your cards each month. It’s a good idea to pay off more than the required minimum – if you can – to ensure your credit trends remain positive. Establishing good credit habits will help you in the long-run instead of drilling your credit into the ground.
Once you apply for a mortgage, pause all other major purchases. Feel free to consistently use your credit card, just be aware of how many big-ticket items you’re charging. The last thing you’ll want is to pile up your debt after you’ve worked hard to pay it down. Pulling your score can lower it too – especially when comparing rates during the home or car buying process.
While these tips won’t change your score instantly, they will help improve your credit trends before applying for a mortgage. Safe spending is always good spending.