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Home > Home Buying Tips > How to Raise Credit Score Before Buying a Home

How to Raise Credit Score Before Buying a Home


Whether you have been putting it off or not, if you make the decision to purchase a home you will be forced to face up to your credit history. Certainly there are other ways you can improve your chances of being approved for a home loan, such as saving up for a larger down payment, but the simple truth of the matter is that you will find it much easier and quicker to receive a home loan with a good credit score. Your credit score can be the simple most important factor that lender considers when determining the interest rate that will be offered to you as well as whether you will even be offered a mortgage at all.

Your credit score, which is also referred to as your FICO score, is taken from your credit history. This means that your history of taking on debt and then subsequently paying it off results in the numerical score that is used to determine your credit worthiness. If you make some wrong financial moves in the weeks, or even in the months prior to the time you decide to apply for a mortgage you could find yourself with a mortgage denial or paying much more than you anticipated.

What is a Good Credit Score?

Considering the current state of the economy, credit scores are even more important now than ever when applying for a mortgage. As a matter of fact, lenders are looking for even higher FICO scores than they have in the best in order to offer the best interest rates. FICO scores range between a minimum of 300 and a high of 850. The highest number reflects the best credit risk. Median FICO scores typically fall around the 720 mark. Unless you have a large down payment or you are a first-time home buyer, lenders will typically want to see a FICO score of at least 680. The higher your FICO score is, the more comfortable lenders will feel providing you with a loan as well as better interest rates. They will also tend to be more flexible with higher credit scores as well. This is because higher credit scores indicate that a consumer has a better ability to manage their finances as well as their credit.

Where to Check your Credit Score

Your credit history directly relates to your credit score. Three major reporting agencies collect information about your credit history and then compile your credit score. The first step in determining your own credit worthiness is to make sure that you pull your credit report from each of those companies; Experian, Equifax and TransUnion. These reports will show the type of debt that you have, how much debt you owe, your habits regarding bill paying and whether you have had any serious problems with credit like a foreclosure or bankruptcy. You can get your free credit reports here.

How to Raise your Credit Score

The next step in the process is to look at your actual FICO score. It should be understood that each of the three reporting agencies have their own methods for determining your overall credit score and as a result they can vary from one company to another. Take a look at your credit scores and determine whether your current credit score would allow you to obtain a mortgage with a good interest rate. If not, then it is time to get to work on raising your credit score by making payments on line, keeping your credit balances at an amount that is at least 30% or under the total amount of available credit.

In addition, you need to make sure you do not take certain actions in the weeks and months leading up to your mortgage application as well as the actual closure date of your loan. For example, avoid opening new accounts or making any new purchases; both of which could hurt your credit score. The worst thing you can do is to go and begin making a lot of purchases in anticipating of your new home. Instead save your money and wait until after the loan has actually closed and you have moved into the home.

It is also important to make sure you are aware of any errors that may be present on your credit report. If you find errors, it is essential to make sure that any errors are corrected before you actually apply for a loan. You can consider engage a credit report repair services firm to fix your credit report!

Finally, avoid getting trapped into any firm that may offer to improve your credit report for free. These companies are not able to do anything that you would not be able to do on your own. In addition, it should be kept in mind that there are some issues that may be on your credit report that can only be corrected by time. Making an effort to pay your bills on time and pay down your balances can go a long way toward helping; however.


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