Tips on Getting Your Credit Ready for a Mortgage

Having a good credit score is important when applying for a mortgage, as it can affect your ability to get approved and the terms of the loan. Here are some tips to help get your credit ready for a mortgage.

Check your credit score

Regularly check your credit score to keep track of your credit standing. A good credit score is usually above 700 and you can obtain a free credit report once a year from each of the major credit reporting agencies.

Pay off debts

High levels of debt can impact your credit score and decrease your chances of getting approved for a mortgage. Focus on paying off high-interest debts, such as credit cards, to lower your debt-to-income ratio.

Correct errors

Review your credit reports from all three credit bureaus annually to ensure accuracy. Dispute any errors you find as they can negatively impact your credit score.

Make timely payments

Late payments can significantly hurt your credit score, so make sure to pay all bills on time, including rent and utilities. Setting up automatic payments can help ensure you never miss a payment.

Avoid new debt

Taking on new debt before applying for a mortgage can increase your debt-to-income ratio, making it harder to get approved. If possible, wait until after you’ve secured a mortgage to make any big purchases.

Keep credit card balances low

High credit card balances can lower your credit score, as it shows lenders that you are relying heavily on credit. Aim to keep your credit card balances below 30% of your credit limit.

Limit credit inquiries

Every time you apply for credit, it shows up as an inquiry on your credit report. Too many inquiries can indicate to lenders that you are struggling to manage your finances and can negatively impact your credit score. Try to limit the number of credit applications you make before applying for a mortgage.