How To Boost Your Credit Score Before You Apply For A Mortgage

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If you’re thinking about buying a house sometime soon, it’s a good idea to pause for a moment and double check your credit score before you submit any application materials.

Your credit score plays a huge role in the interest rate you’ll receive when you apply for a mortgage — that doesn’t just apply to home loans though; the same holds true for personal loans, credit cards and any other form of credit.

National mortgage rates can fluctuate and are usually a good benchmark for what your rate will be at the time, but the best way to get a more accurate reading on your rate is to apply or get pre-approved. Before you do that, you should do what you can to improve your credit score if you feel it’s less than ideal.

So Select rounded up some tips to keep in mind when it comes to improving your credit score. Just remember that boosting your credit score isn’t an overnight process and it can actually take several months of healthy credit habits to start to see some changes, depending on what else is in your credit profile.

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1. Continue making monthly debt payments on-time

Paying your bills on time is the most important thing you can do to help raise your score. That’s because payment history makes up 35% of your FICO® score, making it the most influential factor when determining a person’s credit score. For lenders, a person’s ability to keep up with their credit card payments indicates that they are capable of taking out a loan and paying it back.

But your credit score isn’t just impacted by your credit card bills. You need to pay all your bills on time. That includes all your utilities, student loan debt and any medical bills you might have.

Missing a payment or making a late payment is actually easier than you think. When life gets extra busy, your credit card bill or loan due date can very easily sneak by you. This is why experts recommend using autopay or setting up automatic transfers from your bank account to your bills. This way, you don’t have to remember to manually make payments. This reduces the likelihood that you’ll incur a missing payment, which can hurt your credit score.

2. Don’t open too many new lines of credit at the same time

FICO and VantageScore take into consideration the number of credit inquiries (like, applications for new financial products or requests for credit limit increases) as well as the number of new credit accounts a person opens. Every time you apply for a new credit card or a new loan, the lender runs a hard inquiry into your credit report, which “dings” your credit and can temporarily lower your score.

That being said, applying for multiple lines of new credit all within the same time frame can cause a serious hit to your credit score, so make sure that if you do decide to go forward with a credit application, that it’s absolutely crucial to your financial health. You should forego opening any new lines of credit at least a few months before you apply for a mortgage.

Keep in mind that when applying for a mortgage, it’s highly recommend that you shop around for the best rate by submitting your pre-approval application to multiple lenders, which means that, yes, they are all taking a hard look at your credit profile. However, with mortgages specifically, you can have your credit file pulled as many times as necessary without additional damage to your score as long as it’s within a 45-day window.

Some lenders expedite the pre-approval and application submission process so you can quickly figure out where you stand. Ally Bank is known to offer mortgage pre-approval in as little as three minutes (and you can potentially submit your entire application in as little as 15 minutes). SoFi, which boasts a mortgage application process that is completely online, offers fast pre-qualification and even gives borrowers access to Mortgage Loan Officers for slightly more personalized answers to their questions about the process.

Ally Bank

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, HomeReady loan and Jumbo loans

  • Terms

  • Credit needed

  • Minimum down payment

    3% if moving forward with a HomeReady loan

pros

  • Ally HomeReady loan allows for a slightly smaller downpayment at 3%
  • Pre-approval in just three minutes
  • Application submission in as little as 15 minutes
  • Online support available
  • Existing Ally customers can receive a discount that gets applied to closing costs
  • Doesn’t charge lender fees

Cons

  • Doesn’t offer FHA loans, USDA loans, VA loans or HELOCs
  • Mortgage loans are not available in Hawaii, Nevada, New Hampshire, or New York

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, jumbo loans, HELOCs

  • Terms

  • Credit needed

  • Minimum down payment

pros

  • Fast pre-qualification
  • Provides access to Mortgage Loan Officers for guidance
  • $500 discount for existing SoFi members
  • 0.25% interest rate deduction when you lock in a 30-year rate for a conventional loan
  • Offers up to $9,500 cash back if you purchase a home through the SoFi Real Estate Center

Cons

  • Doesn’t offer FHA, VA, or USDA loans
  • Mortgage loans are not available in Hawaii, New Mexico, or New York

3. Keep your credit utilization rate low

Your credit utilization rate is the amount of credit you’ve used divided by your total available credit. For example, if you’ve spent $5,000 on a credit card with a credit limit of $10,000, your credit utilization rate is 50%. Experts typically recommend keeping your total utilization below 30%, and below 10% is even better.

One important way to keep your utilization low is by continuing to make on-time monthly payments toward your credit card balances (while also keeping new spending as low as possible, of course). If you can’t afford to pay off your credit cards in full each month, you’ll just need to stay patient and consistent with your monthly payments.

Additionally, you might also consider (thoughtfully) opening a credit card with a 0% APR intro period if you’re already carrying a lot of credit card debt (as long as you aren’t already opening too many new lines of credit). These credit cards offer an initial period of usually 12 months or more where you won’t be charged interest on your monthly payments. So you can transfer an existing balance to this credit card and potentially pay it off during that initial period.

This can be extremely helpful if monthly interest charges keep making it hard for you to put a dent in your debt balance. Select ranked the US Bank Visa® Platinum Card and Citi Simplicity® Card as some of the best introductory no-interest cards for balance transfers and new purchases.

US Bank Visa® Platinum Card

On US Bank’s secure site

  • Rewards

  • Welcome bonus

  • annual fee

  • Intro APR

    0% for the first 20 billing cycles on balance transfers and purchases

  • Regular APR

    15.24% – 25.24% (Variable)

  • Balance transfer fee

    Either 3% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fee

  • Credit needed

Citi Simplicity® Card

  • Rewards

  • Welcome bonus

  • annual fee

  • Intro APR

    0% for 21 months on balance transfers; 0% for 12 months on purchases

  • Regular APR

  • Balance transfer fee

    5% of each balance transfer; $5 minimum

  • Foreign transaction fee

  • Credit needed

You may also consider asking your credit card issuer for a credit limit increase. This increases your total available credit and lowers your utilization rate. Many issuers will grant you a limit increase if you’ve owned your card for a while and have been very good about making your payments on-time.

4. Dispute any credit report errors

Whether or not you’re trying to increase your credit score to prepare for mortgage applications, it’s always a smart idea to monitor your credit reports for any inaccuracies — including any instances where lines of credit were taken out in your name that you weren’t aware of.

This can be a very serious issue, especially since inaccuracies and lines of credit you didn’t know about can drag down your credit score by contributing to your utilization rate and debt-to-income ratio.

You might be thinking that it seems unlikely that an error could be made on one of your credit reports, however, 26% of participants in a study by the Federal Trade Commission (FTC) found at least one error on their reports that could make them appear riskier to lenders.

Common mistakes, according to My FICO, occur when a person applies for credit cards under different names, if a clerical error is made when information is typed from a hand-written application or if an ex-spouse’s information is still on your report. If you spot an error, you should then gather any supporting evidence and dispute the mistake either online or by phone with the respective bureau who issued the incorrect report.

You can use Experian, or another credit monitoring service, to easily dispute any errors and to monitor your credit from each of the three major credit bureaus (Experian, Equifax and TransUnion). You can also receive yearly free credit reports by going to annualcreditreport.com.

Experian Dark Web Scan + Credit Monitoring

On Experian’s secure site

  • cost

  • Credit bureaus monitored

  • Credit scoring model used

  • dark web scan

  • Identity insurance

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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