How to Quickly Improve Your Credit Score To Buy a Home

quickly improve your credit

Preparing your finances and accounts for mortgage shopping can be stressful if you aren’t sure where to start. Being able to give your credit a bump can help you secure a higher loan amount, a lower interest rate and more favorable loan terms.

Whether you’re dreaming of a huge home to raise a big family in or want to minimize your monthly payments, quickly improving your credit is the way forward.

Start by Figuring Out Where You Stand

The process of improving your credit quickly will depend on your current credit profile. There are three reporting agencies that you can request a copy of your credit report from. TransUnion, Equifax and Experian all offer a free annual credit report under the Fair Credit Reporting Act.

Just getting your credit score isn’t enough to know which steps to take. Once you have your full report, it’s time to go through any negative remarks and verify if they’re valid or not. There may be errors in reporting or unauthorized accounts that were opened without your knowledge.

Disputing fraudulent activity and getting it removed from your credit report can instantly boost your credit. Other negative impacts on your report could include:

  • Missed payments
  • Overdue accounts
  • High credit utilization
  • Accounts in collection

Bringing any past due accounts current and paying off anything in collections will quickly improve your credit standing and show future lenders that you’re serious about taking control of your finances.

Next, Take Steps To Reduce Your DTI

DTI, or debt-to-income, is the ratio of how much you owe in monthly expenses to your monthly income. Having a lower DTI gives you a better chance at getting approved for a loan as it demonstrates your ability to comfortably take on additional debt.

If you have your monthly expenses laid out in a budget somewhere, and we recommend you do, then you can get a good idea of your DTI. Say you bring in $2,000 a month and have $1,200 in payments. This would put you at a 60% DTI, whereas lenders are looking for it to be 43% or lower.

Make Sure Not to Close Accounts When Paying Them Off

Getting your DTI down will involve reducing your monthly payments any way you can. Typically this means paying off lines of credit with a low balance. It’s important to keep these lines of credit open even if they remain at a zero balance.

Maintaining open lending vehicles in good standing is how you develop a strong credit history, an aspect of your credit report that shows lenders you understand what it means to responsibly borrow funds.

Lastly, Stay Focused on the Mortgage

It may seem tempting to apply for new credit cards to bring down credit utilization or increase the number of open accounts you have, but do so with care. Every new credit inquiry will affect your score, dropping it just before you hoped to apply for a mortgage.

If you’re unsure about which of these options best fits with your home lending goals, we strongly encourage you to reach out to the experts here at the Potempa Team. We work directly with the top lenders in the area to connect you with the right opportunities. Those ready to apply can use our online pre-approval tool to get started today!

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