When applying for a mortgage for your dream home, you’ll learn quickly that having a high credit score will work in your favor and make acquiring this loan much easier. But what if your credit score is not high enough?
The good news is that there are some things you can do to increase your credit score, and we’ll show you how.
Why Do You Need a High Credit Score for a Mortgage?
Your credit score is one of the first things lenders will look at when you apply for a mortgage because it affects the interest you will pay on the loan. The higher your credit score, the lower the interest you will likely pay.
An ideal credit score for applying for a conventional mortgage is 620 or higher. This number will differ depending on the lender, but according to Optimal Blue’s May 2024 Market Advantage report, the average credit score of people getting mortgages is around 738.
If you have a lower credit score, you may be eligible for mortgages from the FHA, but it’s ideally a good idea to try to increase it.
- Ways to Increase Your Credit Score. Building good credit is not as complicated as you may think it is. Sometimes, just making some lifestyle changes can make all the difference between a low credit score and a high one.
- Regularly check your credit reports. Read through a copy of your credit report from major credit bureaus to check if mistakes negatively affect your credit score. This is also a good opportunity to pinpoint things like accounts or late payments that are bringing your score down so you can make some changes.
- Pay all bills on time. One of the best ways to grow your credit is by paying all your bills on time because late payments can stay on your record for up to seven years. A good way to stay on top of paying on time is by setting up automated payments on your account.
- Pay off debts. Paying off debt is easier said than done, but there are some things you can do that can help you get the jump on your debt. How much you owe on accounts accounts for 30% of your credit score, so if you’re making use of revolving accounts, try to keep your utilization rate below 30%. If you have multiple debts that seem overwhelming, focus on paying one debt off first and this could mean the lowest debt and working upwards. By following some of these methods, you will be well on your way to building a good credit score so that you can get a mortgage for your dream home.
Contact an Expert Mortgage Broker in Columbus, OH
Are you ready to purchase your dream home? Contact an expert mortgage broker from Liberty Capital Services to help you get the process started on your home loan. Call us today at (614) 505-0620 to book your consultation.
