How To Improve Your Credit Score Before Buying a Home

If you want to become part of the 65 percent of Americans who own their homes, credit can often be a hurdle. Whether you’ve not established enough credit, or if you’ve had some hiccups with your finances along the way, amping up your credit score to purchase a home is not an insurmountable task. Read on to learn how, with a little planning and patience, you can improve your credit score and be on your way to financing a home purchase. 

Understanding credit scores

The easiest way to explain a credit score is that it’s a numerical score, between 300 and 850, that represents how you repay your creditors. Your credit score is based upon your credit history, and the higher your score, the less of a risk you appear to potential lenders. 

Your credit score is the culmination of your history in the following areas: payment history, total debt, types of credit lines utilized, new credit lines, and the length of your credit history. When prospective homeowners are told that they need to improve their credit score to be eligible for financing, it’s typically because they score low in one or more of the areas in their credit score profile.

Know where and how to improve credit 

But, you want to know the credit score you need to buy a house, right? Unfortunately, there’s not a one size fits all answer. But if you want a ballpark number, 684 is the average credit score of first-time homebuyers. 

If there are weak areas in your credit history, you’ll need to know what they are. And the only way to know where your credit needs improvement is to get a credit report and sift through it. If there aren’t obvious overdue payments or collections on your record, you’ll want to consult with the pros. Sit down with a mortgage lender to go through your credit history and see what areas need work.

Stay on top of balances

As you prepare for your home purchase, a simple rule of thumb is to be mindful of your credit balances. An easy way to improve your credit score is to pay down high credit card balances and keep them low. And while you may think it’s a good idea to pay off credit lines, if your score is low due to not having enough credit history, you’ll want to keep cards open to build your score through revolving payments.

Settle outstanding debts

As you likely know, credit scores are adversely affected when by late or overdue payments. The best way to improve your credit score is to get up to date on payments and take care of any outstanding debts.

If you have a bill or bills in collections, work with the agency to take care of the balance, and always ask to “pay to delete” the negative strike from your credit record. And while you can often negotiate the payoff balance, always make sure that the outstanding debt will be removed from your credit report. Ask the collections agency you’re working with to send you a letter saying that they will delete the negative strike from your credit so that you have proof, should it not be removed.

Don’t take on more debt

If you’re trying to improve your credit score to qualify for a mortgage, it’s not the best time for you to take on more debt. If your credit score is weak, purchasing a car isn’t going to magically hike up the score immediately. Instead, you’ll have increased your debt load which looks even riskier than low or poor credit to a potential lender. 

Be patient with the process 

It can be frustrating to discover that your credit isn’t strong enough for a home purchase, especially when you’ve found the perfect home on the market. However, improving your credit score is worth the wait and you’ll be glad you took the necessary steps to bolster your score when you finally sign on the dotted line.

It’s important to note that, depending on where and what your credit score deficits are, your credit score can improve in just a few weeks. Whether it’s paying off an outstanding account or giving yourself a few more months of revolving payments, if you approach things with a plan and be patient with the process, you’ll find yourself moving into your first home sooner rather than later. The most important thing is not to get discouraged and to keep plugging away with a plan.

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