According to Experian, the average FICO Score in the United States was 714 in 2022.
When you’re considering buying a new home, your credit score is arguably the most important factor when you’re seeking a mortgage approval. On average, the minimum credit score to qualify for a mortgage is roughly 620-640. However, some mortgage lenders have programs that can accommodate a lower score. Needless to say, improving your credit score is always beneficial regardless of your plans to buy a new home in the future.
Here are a few ways to improve your credit score:
Check Your Credit Report Regularly
The first step in improving your credit score is to know where you stand. Request a copy of your credit report from each of the three major credit bureaus – Experian, Equifax, and TransUnion – and review them for errors or inaccuracies. If you find any errors, dispute them with the credit bureau to have them corrected.
Make On-Time Payments
Your payment history is the most critical factor in determining your credit score. Paying your bills on time is essential to maintaining a good credit score. Set up automatic payments or reminders to ensure that you make your payments on time. Late payments can have a significant impact on your credit score and can take years to recover from.
Pay Down Your Debt
High debt levels can negatively impact your credit score. If you have outstanding credit card balances, pay them down as quickly as possible. Focus on paying off the balances with the highest interest rates first to maximize the benefits of the cash that you have available to pay down your debt.
Increase Your Credit Limit
Increasing your credit limit can help improve your credit utilization ratio, which is the percentage of your available credit that you’re using. A lower credit utilization ratio is better for your credit score. Contact your credit card issuer and request a credit limit increase, but be sure not to use the additional credit to accumulate more debt.
Keep Old Accounts Open
The length of your credit history is also an important factor in determining your credit score. Keep old credit accounts open, even if you’re not using them. The longer your credit history, the better your credit score.
By leveraging these 5 tips above, you’ll start to see your credit score improve and position yourself to buy a home before you know it.
TIP: Be careful and avoid scams to help you improve your credit and increase your score. The money that you’re throwing away to those companies would be better utilized paying down your existing debt.
If you’re considering buying a home this year, contact us today and we’d love to help!
