How to Boost Your Credit Before You Apply for a Mortgage

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If you’re thinking about buying a home soon, it’s a good idea to take a moment and check your credit before submitting any application.

Your credit rating plays a big part in the interest rate you get when you apply for a mortgage — but it’s not just true for home loans; the same applies to personal loans, credit cards and any other form of credit.

National mortgage rates can fluctuate and are usually a good guide to your current interest rate, but the best way to get a more accurate reading of your interest rate is to apply or get pre-approved. Before doing so, do whatever you can to improve your credit score if you don’t think it’s ideal.

Therefore, Select has put together some tips to keep in mind when it comes to improving your credit score. Just remember that improving your credit score isn’t an overnight process and it can actually take several months to change some healthy credit habits, depending on what else is on your credit profile.

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1. Continue to make monthly debt payments on time

Paying your bills on time is the the most important thing you can do to increase your score. Because payment history accounts for 35% of your FICO® score, making it the most influential factor in determining a person’s credit score. For lenders, a person’s ability to keep up with their credit card payments means their ability to borrow and repay.

But it’s not just your credit card statements that affect your credit score. You must pay all your bills on time. This includes all of your utility bills, student loan debt, and any medical bills you may have.

Missing a payment or making a late payment is actually easier than you think. When life gets particularly busy, your credit card statement or loan due date can easily slip past 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 think about making payments manually. This reduces the likelihood of receiving a missed payment, which can damage your credit score.

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

FICO and VantageScore consider the number of credit requests (e.g., applications for new financial products or requests for credit limit increases) and the number of new credit accounts that an individual opens. Every time you apply for a new credit card or loan, the lender keeps one harsh querying of your credit report, which will affect your credit score and may temporarily lower your score.

However, applying for multiple new lines of credit in the same timeframe can seriously affect your credit score. So make sure that when you decide to apply for a loan, it is absolutely critical to your finances and health. At least a few months before applying for a mortgage, you should refrain from opening new lines of credit.

Remember that when applying for a mortgage it is highly recommended that you shop around for the best interest rate by submitting your application for pre-approval to multiple lenders, which means they all take a close look at your credit profile. However, with mortgages in particular, you can have your credit file drawn as many times as needed with no additional damage to your score, as long as it’s within a 45-day window.

Some lenders speed up the pre-approval and application submission process so you can quickly find out where you stand. Allied Bank is known for offering mortgage pre-approval in as little as three minutes (and you can potentially submit your entire application in as little as 15 minutes). SoFiwhich features a fully online mortgage application process, offers fast pre-qualification and even gives borrowers access to mortgage loan officers for a little more personalized answers to their process questions.

Allied Bank

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; Fixed rate and adjustable rate mortgages included

  • types of loans

    Conventional Loans, HomeReady Loans, and Jumbo Loans

  • conditions

  • credit required

  • minimum deposit

    3% if proceeding with a HomeReady Loan

advantages

  • The Ally HomeReady loan allows for a slightly lower 3% down payment
  • Pre-approval in just three minutes
  • Application submission in just 15 minutes
  • Online support available
  • Existing Ally customers can receive a discount applied to the closing cost
  • Does not charge lender fees

Disadvantages

  • Does not 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

  • conditions

  • credit needed

  • minimum deposit

advantages

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

Disadvantages

  • Does not 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 The credit utilization rate is the amount of credit you have used divided by your total available credit. For example, if you spent $5,000 on a credit card with a $10,000 credit limit, your credit utilization rate is 50%. Experts typically recommend keeping total utilization below 30%, and below 10% is even better.

An important way to keep your utilization low is to keep making punctual monthly payments on your credit card balance (while also, of course, keeping new expenses to a minimum). If you can’t afford to pay off your credit cards in full every month, all you have to do is be patient and consistent with your monthly payments.

Additionally, you might also (thoughtfully) consider opening a credit card with a 0% APR introductory period if you already have a lot of credit card debt (as long as you’re not already opening too many new lines of credit). These credit cards offer an initial period, typically 12 months or more, during which you will not be charged interest on your monthly payments. So you can transfer an existing balance to this credit card and possibly cash out at this initial stage.

This can be extremely helpful if monthly interest costs keep making it difficult for you to strain your debt balance. Select the rank US Bank Visa® Platinum card and Citi Simplicity® card as some of the best interest free introductory cards for balance transfers and new purchases.

US Bank Visa® Platinum card

On the safe side of the US bank

  • Reward

  • welcome bonus

  • Annual fee

  • Introduction APR

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

  • Regular APR

    15.24% – 25.24% (variable)

  • transfer fee

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

  • foreign transaction fee

  • credit needed

Citi Simplicity® card

  • Reward

  • welcome bonus

  • Annual fee

  • Introduction APR

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

  • Regular APR

  • transfer fee

    5% of each balance transfer; At least $5

  • 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 give you a limit increase if you’ve had your card for a while and are very punctual with your payments.

4. Report errors on the credit report

Whether you try or not Boost your credit score to prepare for mortgage applications. It’s always a good idea to monitor your credit reports for inaccuracies – including any instances where lines of credit were taken out in your name that you were unaware of.

This can be a very serious problem, especially since inaccuracies and lines of credit you were unaware of can affect your credit score by adding to your utilization and debt-to-income ratio.

You may think it seems unlikely that a mistake could be made on any of your credit reports, but 26% of participants in a Federal Trade Commission (FTC) study found at least one error in their reports that could make them appear riskier to lenders.

Common mistakes, according to My FICO, occur when an individual applies for credit cards under different names, when a clerical error is made when entering information from a handwritten application, or when a former spouse’s information is still on your report. If you discover an error, you should gather all supporting evidence and dispute the error either online or by telephone with the entity that issued the incorrect report.

You can use experiential, or another credit monitoring service to easily dispute errors and monitor your credit from any of the three major credit reporting agencies (Experian, Equifax, and TransUnion). You can also get annual free credit reports by going to annualcreditreport.com.

Experian Dark Web Scan + Credit Monitoring

On Experian’s secure website

  • Costs

  • credit bureaus monitored

  • Credit scoring model used

  • Dark web scan

  • identity insurance

Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editors and has not been reviewed, approved, or otherwise endorsed by any third party.

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