5 Ways to Increase Your Credit Score to Buy a House
Many potential homebuyers are intimidated by the idea of building their credit score to purchase a home. But what they don’t realize is that the credit score needed to be eligible for a mortgage is lower than they might think. Once you grasp what credit score you need, you can begin to plan ways to increase your credit score to buy a house. Although it won’t happen overnight, making changes will help you plan ahead and prepare to purchase a home.
Increase your Credit Score to Buy a House in these 5 ways:
1. Pay your bills on time consistently
Build a bill payment schedule to ensure you’re paying your bills on time consistently. This will have a positive impact on your credit score. When improving your credit score to buy a house, lenders want to see that you can handle credit responsibly. That includes being able to pay what you owe on time each month.
2. Keep your credit card balances low
You should aim to keep your credit card usage below 25%. This is an area that's taken into consideration when calculating your overall credit score. Lenders want to see that you aren’t maxing out all of your areas of credit and are consistently working to appropriately pay them off.
3. Maintain older lines of credit
Another area that affects your credit score to buy a house is the age of your credit. Having older lines of credit positively impacts your credit score because it shows that you have handled credit for a longer period of time. In order to keep the positive impact that these older lines of credit have on your credit score, you need to keep them open and active. A tip for keeping them active is to use them every couple of months, and pay the balance off in full each time. This will not only keep the older line of credit active, it will also show you can responsibly handle credit.
4. Avoid opening new lines of credit
If you are considering buying a home, it’s best that you avoid opening any new lines of credit. Opening new lines of credit will negatively affect your credit score to buy a house because it temporarily lowers your score and takes some time to improve. Give yourself, at the minimum, a 6 month to a year window where you avoid opening any new lines of credit.
5. Dispute any false information on your credit score
The final step to preparing your credit score to buy a house is to make sure your current credit score is accurate. Don’t be blindsided by surprises when your potential lender pulls your credit score, make sure you’re prepared with what’s on your report. By taking the time to review your report, it gives you the opportunity to dispute anything that’s incorrect. This process can take time, so make sure that you give yourself ample time to review the report before you begin your home buying journey.
Building your credit score to buy a house doesn’t have to be a daunting process. It’s all about making little changes that have a positive impact on your credit score over time. By following these 5 tips, you’ll be sure to improve your credit score and get one step closer to purchasing your dream home.
