6 Strategies to Improve Your Credit Before Buying a Home

When it comes to buying a home, your credit score is one of the most important factors that lenders evaluate. A higher credit score can unlock better interest rates, lower down payments, and overall more favorable mortgage terms. If your credit isn’t where you want it to be, don’t worry. With a few strategic moves, you can boost your score and position yourself for a successful home purchase. Here are six key strategies to improve your credit before buying a home:

1. Review Your Credit Report and Dispute Errors

The first step to improving your credit is to know exactly where you stand. Obtain a copy of your credit report from all three major bureaus (Equifax, Experian, and TransUnion). Look for errors like incorrect balances, late payments that weren’t late, or accounts you don’t recognize. If you find any mistakes, dispute them immediately. Correcting even small errors can lead to a significant improvement in your score.

2. Pay Down Credit Card Balances

Your credit utilization ratio, or how much of your available credit you’re using, accounts for about 30% of your credit score. Ideally, you should aim to keep your credit utilization below 30%. If possible, work on paying down your existing credit card balances to lower that percentage. This shows lenders that you manage your credit responsibly, which can give your score a boost.

3. Avoid Opening New Lines of Credit

While it may be tempting to open new credit cards or take out loans, especially for large purchases, it’s best to avoid doing so in the months leading up to buying a home. Every time you apply for new credit, it results in a hard inquiry on your report, which can temporarily lower your score. Additionally, new credit accounts lower the average age of your credit history, which could hurt your score.

4. Make All Payments On Time

Your payment history is the most significant factor in your credit score, accounting for 35%. Consistently making on-time payments for all of your bills — credit cards, loans, utilities, and even rent — is critical. Set up reminders or automatic payments to ensure you never miss a due date. Even one late payment can negatively impact your score, so timeliness is essential.

5. Pay Off Outstanding Debts

Unpaid debts or collections accounts can drag down your credit score significantly. If you have any outstanding debts, work on paying them off as soon as possible. In some cases, you may be able to negotiate with creditors or collection agencies to settle for less than the full amount owed. Once paid off, these negative marks will eventually lose their impact, helping to improve your score over time.

6. Limit Credit Inquiries

As mentioned earlier, each hard inquiry on your credit report can lower your score slightly. While applying for a mortgage involves a hard inquiry, avoid applying for other loans or credit cards around the same time. If you plan to shop for mortgage rates, try to do so within a short period (such as 30 days) so multiple inquiries are treated as one.