If you’re looking to buy a house, one of the most important things you can do is to make sure your credit score is as high as possible. A high credit score will not only help you get approved for a loan, but it will also help you get a lower interest rate on your loan.
There are a number of things you can do to improve your credit score, and we’ve outlined 7 of them below. If you follow these steps, you’ll be in a much better position to get a good interest rate on your loan and buy the house of your dreams.
1 Check your credit report for errors
The first step to improving your credit score is to check your credit report for any errors or outdated information. You’re entitled to one free credit report per year, so make the most of it by requesting yours and checking it for any errors. If you find any mistakes, you can dispute them with the credit bureau and have them removed. This can result in an instant improvement in your credit score.
2 Pay your bills on time
Another big factor in determining your credit score is whether or not you make your payments on time. Making your payments on time is a great way to show lenders that you are reliable and responsible with your finances, which can go a long way toward improving your credit score.
3 Reduce your debt
Another important factor in determining your credit score is how much debt you have in relation to your income. The less debt you have, the better your credit score will be. Try to pay down as much debt as you can, especially high-interest debt, so you can see a positive effect on your credit score.
4 Don’t open new credit accounts
Some people think it’s a good idea to open up a new credit card when they’re looking to buy a house, but it can actually have a negative effect on your credit score. That’s because each time you apply for a new credit line, the lender makes a ‘hard’ inquiry on your credit report, which can temporarily lower your score.
5 Keep old credit accounts open
If you already have a few credit accounts open, you should avoid closing them. That’s because having a longer credit history can help to improve your score, so you should keep any open accounts that you’re not using but are still in good standing.
6 Check your credit utilization ratio
Your credit utilization ratio is the amount of credit that you’re using compared to the amount of credit available to you. If your credit utilization ratio is too high, it can have a negative effect on your credit score, so you should always try to keep it below 30%.
Conclusion:
Improving your credit score is an important part of the home-buying process, and these 7 steps should help you do it. Remember to check your credit report for errors, pay your bills on time, reduce your debt, don’t open new credit accounts, keep old credit accounts open, and don’t close credit accounts. Finally, make sure you stay on top of your credit utilization ratio. Following these steps should help you get your credit score in shape before buying a house.