Credit score plays an important role in purchasing a home. The higher the credit score, the lower the interest rate, and the more loan types available to you. If you are worried that your credit score could derail your financial goals, check out these 5 ways to boost your credit score before buying a home.
How to Boost Your Credit Score Before Buying a Home
Examine Your Score
The first step to boost your credit score before buying a home is to examine your score. There are many online services that can show you an accurate depiction of your current credit score. Within these apps, you can see your current score as well as what you’re doing well in and what you can do to improve your score. Many of these apps actually give you suggestions of steps to take to strengthen your credit score. Once you know where you stand, you can move onto taking steps to boost your score.
Pay Down Credit Card Debt
One of the most promising ways to improve your credit score is to pay down credit card debt. 30% of your FICO score is largely based upon revolving utilization, so this is a great area to improve. A higher revolving utilization typically correlates with a lower credit score, so when you pay down balances of your available credit, your credit score should improve.
Check For Errors
Checking for errors on your credit score can help boost your credit score. If you dispute a credit card error today, it could be 45 days before the credit bureaus can complete an investigation. Comb through your credit report and see if all active accounts and closed accounts are accurate. If any payments are shown as late, and they were in fact paid on time, you can dispute this error for a lift in credit score.
Don’t Close Unused Credit Cards
Keeping unused credit cards open – as long as they’re not costing you an annual fee – is a smart strategy since closing accounts drops your overall credit score. Owing the same amount but having fewer open account can bring down your score.
Don’t Apply For Too Much Credit
When looking to buy a home, hold off on opening credit cards for furniture and electronics until after you’ve closed on your home. Opening a credit card can increase your overall credit limit, but the act of applying costs you one of your few allowed credit inquiries per year. Too many hard inquiries can negatively impact your credit score.
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