If you’re planning to buy a home soon, your credit score will play a huge role in determining your loan eligibility and interest rate. A strong credit score can save you thousands over the life of your mortgage, while a low score can make homeownership more expensive—or even out of reach. Understanding how credit scores work and how to improve yours quickly can help you get mortgage-ready. Here’s what you need to know.
How Does Your Credit Score Work?
Your credit score is a three-digit number that lenders use to assess how risky it is to lend you money. Scores typically range from 300 to 850, with higher scores indicating better creditworthiness. Mortgage lenders look at this score to determine the interest rate and loan terms they’ll offer.
Your credit score is calculated using five key factors:
- Payment History (35%) – On-time payments have the biggest impact on your score. Late or missed payments can significantly lower it.
- Credit Utilization (30%) – This is the percentage of your available credit that you’re using. Keeping this below 30% is ideal.
- Length of Credit History (15%) – The longer your credit history, the better. Lenders like to see a track record of responsible borrowing.
- Credit Mix (10%) – Having different types of credit, such as credit cards, auto loans, and mortgages, can positively impact your score.
- New Credit Inquiries (10%) – Applying for multiple new credit accounts in a short period can lower your score.
What Lowers Your Credit Score?
Understanding what negatively impacts your score is just as important as knowing how to improve it. Some of the biggest factors that can lower your credit score include:
- Late or missed payments
- Maxing out credit cards
- Frequent hard credit inquiries
- Closing old credit accounts
- Defaulting on loans or accounts going to collections
How to Improve Your Credit Score Fast
If you’re looking to buy a home soon, here are some steps to boost your credit score as quickly as possible:
- Pay Your Bills on Time – Set up automatic payments or reminders to avoid missing due dates.
- Reduce Credit Card Balances – Aim to keep your credit utilization below 30%, and ideally under 10% for the best impact.
- Avoid Opening New Credit Accounts – Each application triggers a hard inquiry, which can temporarily lower your score.
- Check Your Credit Report for Errors – Dispute any inaccuracies with the credit bureaus to ensure your report is accurate.
- Keep Old Accounts Open – The length of your credit history matters, so avoid closing long-standing accounts.
- Negotiate With Creditors – If you have late payments or outstanding debts, contact creditors to arrange a payment plan or request goodwill adjustments.
- Use a Secured Credit Card or Credit-Boosting Tools – If your score is low, consider using a secured credit card or services that report rent and utility payments to the credit bureaus.
Preparing your credit for homebuying takes time, but by following these tips, you can improve your score and secure better mortgage options. Whether you’re planning to buy a home or getting yours on the market, Mr. Lister Realty is here to help!
Disclaimer: Mr. Lister Realty provides these tips for informational purposes only. This is not a guarantee of loan approval or credit improvement. Please consult with a lender or financial expert for personalized credit advice
