How to improve credit score for mortgage?
If you want to qualify for a mortgage, you need nothing but a healthy credit score. A high credit score makes things simple and allows you to get a mortgage approval more easily with a lower interest rate.
In this blog post, we will discuss how you can improve your credit score for a mortgage. Keep reading to learn more!
The credit score you need to apply for a mortgage.
As per most mortgage lenders, the credit score you need for a FHA mortgage loan is 580 to 620 on average.
However, if you have a higher score, you can get the mortgage easily, and high credit scores will be beneficial in many aspects. Moreover, a high credit score means a lower interest rate.
Some Handy Tips to improve credit score before getting a mortgage
Mortgages are a big commitment, and before you take the plunge, it's important to ensure your credit is in good shape. Below are some handy tips to repair or improve your credit rating so you can get the best mortgage loan with the lowest possible rate.
Check out your updated credit report and scores.
First, we will advise you to get an updated tri-merged credit report from all major credit bureaus. Apart from analyzing your credit report, ensure it is free of errors and incorrect details. If you find any error or mistake, immediately file a dispute with the credit bureaus.
Pay your bills timely.
The rule is if you want to improve your credit for a mortgage, you need to keep all your accounts in healthy condition.
Remember, missing a payment means a low score, and you might not qualify for a mortgage with late payments reported in the last 12 months. If you are currently late on your payments, file a dispute with the credit bureaus or contact your lender immediately for a goodwill deletion, if applicable.
Decrease credit card balances
Your credit utilization matters a lot. Credit utilization represents the amount you have to repay against your available credit limit, and it weighs around 25 percent of your overall credit score. The lower ratio, the better your credit score will reflect.
The general rule is, if your utilization ratio is higher than 30 percent, that account is now hurting you instead of helping.
Don’t open new accounts.
Getting new credit will hurt your credit score. Hence, before applying for a mortgage, you must avoid new credit cards or loans. Similarly, don’t apply for these things during the loan process. Furthermore, please don’t close your old accounts as it can affect your credit history, utilization ratio and might negatively impact your credit score.
See help from a reliable credit user.
If you are a first-time buyer, it means you will not have a rich and long credit history. Thus you will have to build your credit history. In this case, the best way to do so is to become an authorized user on any family member’s or friend’s credit card. Your primary cardholder will make the payments on your behalf, and it will result in a positive payment history.
