Perhaps you’ve just started learning how to budget properly or may have been unlucky in the past. Now, your credit score is not where you want it to be. While you can’t get a loan very a very low number, having a high credit score is not a necessity in buying a house. Yet, it certainly helps.

Lower interest rates are something everyone wants. Regardless of the reason that your credit score is lower than you would like, check out these tips for increasing it so you can better afford your new home.

First, pull your credit report. If your score is above 760, don’t worry about trying to get it any higher. You already have a great score. Otherwise, read on.

Follow three simple rules

Jeffrey Scott, a spokesman for FICO, claimed that all you have to do to raise your score is “Pay all your bills on time, every time, keep your credit card balances low, and only open new credit when you need it.”

While this advice seems obvious and you might not have been successful in the past, starting right now is important. Don’t lament about what happened before; start immediately paying your upcoming bills on time. This will greatly improve your credit score.

Also, if you can afford to, pay more than the required minimum payment each month to increase your number more quickly. A history of minimum-only payments can be a detriment to those viewing your report. Even if you’re only paying a little bit over the minimum, it will help (as well as save you money on interest).

Understand (and fix) your credit ratio

The way that your FICO score works is by comparing the amount of debt you have to your available credit. This means that some people’s advice of closing out your credit cards after they’re paid off is not a good idea.

Closing the credit card would mean that the amount of available credit you have will greatly fall. If you consider the credit ratio, you’ll see that this will negatively affect your FICO score, which is clearly the opposite effect of what you want.

If you don’t trust yourself not to overspend with the credit card, lock it away or give it to someone you can rely on.

While you should not only pay off your credit card bill as quickly as possible, you should also ask for a limit increase. Raising this will help improve your debt-to-credit ratio, helping your FICO score. The smaller percentage of debt will help you get closer to the interest rates you really want.

Don’t open new cards

When you understand credit ratio, you might think it will be a good idea to open numerous, new credit cards. Well, this type of behavior appears very risky to lenders and can hurt your score.

If you’re looking for one new credit card, this is acceptable. Just make sure you don’t open multiple accounts hoping for a better number.

On this note, older cards are actually better for your credit score. The length of your credit history factors in, so a long-term credit card account is better than a brand new one.

If the interest rate on your oldest card is very high or you don’t like the rewards it comes with, just put it in a drawer and don’t use it. This is a much smarter option than canceling it when it comes to thinking about your credit score.

Pay outstanding debt ASAP

Paying off any late accounts does not make them disappear from your record, but it does help. The longer these outstanding debts have been paid off, the more your credit score will grow.

It can be quite difficult to pay all current balances while also focusing on outstanding debt, but to improve your credit score, it’s a must.

Any errors in your report?

Do you feel like you should have a higher credit score than you do? Errors are not that uncommon. Check your report with a fine-toothed comb for things like balances that seem off or accounts that you didn’t create. Also, double check that every lender has accurately reported your credit limits.

It might seem crazy, but according to Forbes, “a whopping 25% of people who get declined for a mortgage had errors in their credit report.” These inaccuracies must be spotted and fixed by you by following the instructions on any of the credit bureau websites or your report.

Make sure you keep a record of everything involving your dispute. You can expect a response within thirty to sixty days of making the claim.

Don’t make any big purchases

This one is extremely important, especially if your credit has already been pre-approved and you’re waiting to close on a new house. Making any large purchase will affect your ability to get a loan.

If you’re trying to buy a car, take a nice vacation, or even purchase some appliances for your potential new house, just wait. These decisions can have very detrimental consequences, leaving you without a loan for your dream home.

Big purchases can also greatly impact your credit score because of the ratio explained above. Simply put, if you have more debt, your number will be lower.

Short and long-term changes

A fairly immediate change to your credit report will happen if you found any irregularities or errors in it. As soon as these are corrected, you should see your score go up.

It could take weeks or months of paying down balances to see a difference in your score. This entirely depends on you. For example, if you continue making minimum payments that are always on time, this will gradually help you score.

Instead, if you regularly make very large payments to the point where you have no or almost no debt left, your score will increase more quickly.

Paying off those outstanding debts could help you negotiate with lenders. However, you have to be patient about your credit score changes with this tactic as it takes from months to years to see large differences.

Follow the tips outlined above and your credit score will undoubtedly increase, potentially saving you tens of thousands of dollars in interest on your loan.

Michele Karl is the Owner/Broker of Priority Real Estate. She can be reached at her email at or give her a call at her office at 865-577-6600.


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