Improving your credit score before applying for a mortgage is an important step that can help you secure a lower interest rate, potentially saving you thousands over the life of your home loan. Here are several strategies to help you boost your credit score before buying a house.

Understand Your Credit Report

The first step is to get your credit report from the three major credit bureaus: Experian, TransUnion, and Equifax. You are entitled to a free copy of your credit report from each bureau through AnnualCreditReport.com. You can also check your FICO® Credit Score through a feature on Partner Colorado’s Mobile Banking App.

Review your reports for errors such as incorrect account information or fraudulent activity, which can negatively impact your score. If you find any discrepancies, dispute them immediately with the credit bureau to have them corrected.

Pay Your Bills on Time

Your payment history is one of the most significant factors in your credit score, accounting for about 35% of your FICO score. Late payments can stay on your credit report for up to seven years, so it’s important to pay all your bills on time. Consider setting up automatic payments or reminders to help you stay on top of due dates. Even if you've missed payments in the past, consistently paying on time going forward can positively impact your credit score.

Reduce Credit Card Balances

Credit utilization, which is the ratio of your credit card balances to your credit limits, accounts for about 30% of your FICO score. Aim to keep your credit utilization below 30% of your total available credit. For instance, if you have a total credit limit of $10,000, try to keep your balance under $3,000. Paying down existing debt and avoiding new purchases on your credit cards can help you achieve this.

Avoid Opening New Credit Accounts

Each time you apply for new credit, a hard inquiry is recorded on your credit report, which can slightly lower your score. Multiple inquiries within a short period can have a more significant impact. Therefore, avoid opening new credit accounts or taking on additional debt before applying for a mortgage. Instead, focus on maintaining your existing credit accounts and managing them responsibly.

Increase Your Credit Limits

If possible, contact your credit card issuers to request a credit limit increase. This can help lower your credit utilization ratio as long as your spending doesn’t increase with the higher limit. Be cautious with this approach, as it’s important not to use the increased limit as an excuse to incur more debt.

Become an Authorized User

If you have a family member or friend with a good credit history, consider asking them to add you as an authorized user on their credit card account. This can help improve your credit score by increasing your credit history and available credit, as long as they maintain a low balance and pay on time.

Diversify Your Credit Mix

Your credit mix, which includes the different types of credit accounts you have (credit cards, loans, retail accounts, etc.), makes up about 10% of your credit score. While you shouldn’t take on new debt unnecessarily, having a diverse mix of credit types can be beneficial if managed responsibly.

Ask for Help

If you’d like more help gaining a better understanding of your credit report and ways to improve your credit score, Partner Colorado members can get support from our Partners in Financial Health program. A GreenPath credit counselor will work with you to review your financial situation and develop a personalized plan to meet your needs.

Improving your credit score takes time, so start working on these steps well before you plan to apply for a mortgage. By enhancing your credit profile, you’ll not only increase your chances of approval, but also position yourself for more favorable loan terms.