It is a common misconception among first-time homebuyers that you need an excellent credit score in order to qualify for a mortgage. While a good credit standing can open up a lot of opportunities for you in terms of mortgage rates and house options, it’s not deemed as a necessity.
It makes sense to want to increase your credit score, and not just to get a better mortgage. Here are some ways you can quickly increase your credit score before buying a house:
1. Review your credit report
Mortgage brokers in Salt Lake City and other places will look at your credit report as part of the pre-approval or application process. So, before you approach a lender, it’s best that you review your credit report.
Check your credit report online and see if there are any errors that are decreasing your score. If there are, contact the appropriate credit bureaus to dispute the errors.
2. Downsize your debt
One of the best ways to improve your credit score is to reduce your current debts. If you have a lot of debt (e.g. car loan, personal loans, credit cards, etc.), pay them down to the best of your ability. Use your bonuses, tax refunds, and other extra cash to downsize your debt. If you want, you can also refinance your debts into one loan to make payments more manageable.
At the same time, avoid incurring new debts, especially if you cannot afford to pay them off. Handle your finances carefully and spending more than you can afford on your credit cards. In this way, your cash flow will be concentrated on paying the debts that you currently owe.
3. Seek help from family and friends
If you have a limited credit history, you can ask relatives or friends with good credit scores to add you as an authorized user on their credit accounts. Even if you don’t use the account, the great credit standing will reflect on your credit report.
4. Get a credit limit increase
Another quick and easy way to increase your credit score is to ask for a credit limit increase. Although your debt-to-income ratio and outstanding debt don’t change, the amount of your available credit increases, which will consequently lower your credit use.
5. Request for a rapid rescore
After you’ve disputed errors on your account and paid off a good chunk of your debts, it’s a good time to request for a rapid rescore of your credit history so you can see how much your score has changed. Ask your lender to request a rapid rescore since this service is not available for the general public.
With these tips, you can quickly increase your credit score to qualify for a better mortgage. But if you opt for the slow and steady way, you can increase your credit score by making payments on time, sticking to your budget, and keeping your balances as low as possible until it’s time to apply for a mortgage. This way, you can get a good chance of getting a better deal.
