How to Improve Your Credit Score Before Applying for a Mortgage

May 1

If you're planning to buy a home soon, one of the most important steps you can take is to improve your credit score. A higher credit score can help you qualify for better mortgage rates, lower monthly payments, and more favorable loan terms. Here's how you can boost your credit score before applying for a mortgage.

1. Check Your Credit Report for Errors

Start by requesting a free copy of your credit report from all three major credit bureaus—Equifax, Experian, and TransUnion—through AnnualCreditReport.com. Look for:

Incorrect account information
Outdated personal details
Duplicate accounts
Fraudulent activity or unauthorized accounts

If you find any errors, dispute them immediately with the appropriate credit bureau. Correcting mistakes can quickly raise your score.

2. Pay All Bills on Time

Your payment history is the most significant factor in your credit score—accounting for about 35%. Set up reminders or automatic payments to ensure you never miss a due date. Even a single late payment can negatively impact your score, especially if you're planning to apply for a mortgage soon.

3. Reduce Credit Card Balances

Your credit utilization ratio—the percentage of your available credit that you're using—should ideally be below 30%, and lower is better. Here's how to improve this ratio:

Pay down high balances
Spread debt across multiple cards if needed
Ask for a credit limit increase (but avoid using the extra credit)

Lowering your credit utilization can quickly boost your score, often within a billing cycle.

4. Avoid Opening New Credit Accounts

Every time you apply for new credit, a hard inquiry appears on your report, which can slightly lower your score. Opening new accounts also shortens your average account age, which can hurt your score. Focus on maintaining your existing accounts and keeping them in good standing.

5. Keep Older Accounts Open

Length of credit history makes up about 15% of your score. Even if you’re not using an old credit card, keeping it open can help your average account age. Unless the card has an annual fee, it’s often best to leave it open.

6. Handle Collections and Charge-Offs

If you have any accounts in collections, it’s crucial to address them. You can:

Pay them off (ask for a "pay for delete" agreement)
Settle for less than the amount owed
Dispute if the debt is inaccurate

Clearing up collections won’t erase the negative mark immediately, but it can show future lenders that you’ve taken steps to become more financially responsible.

7. Limit Hard Inquiries

When shopping for a mortgage, multiple inquiries within a 30-45 day period are typically treated as one for credit scoring purposes. However, avoid unnecessary inquiries from credit cards, car loans, or personal loans leading up to your mortgage application.

8. Become an Authorized User

If you have a trusted family member or friend with good credit, becoming an authorized user on their account can improve your score. Their positive payment history and low utilization rate can reflect well on your credit report.

Final Thoughts

Improving your credit score takes time and consistency, but even small changes can make a significant difference. Ideally, start improving your credit 6 to 12 months before applying for a mortgage to give yourself the best chance at qualifying for a competitive rate.

By focusing on responsible financial habits, correcting errors, and managing your credit wisely, you'll be in a strong position to secure the home—and mortgage—of your dreams.

Akshay Kumar