5 Quick Ways To Raise Your Credit Score Before Buying A House
What Is A Good Fico Score For Buying A House – How to Choose
Ways to increase your credit score quickly
So what can you do to bump up your score within a reasonable amount of time? Though building good credit takes years of maintaining good habits, there are a few things you can do to give your score a boost before applying for a mortgage.
1. Dispute credit report errors.
“You should start by getting a copy of your credit report and looking for any mistakes,” Walsh said. “There may be errors on your credit report that could negatively impact your score.” In fact, one report by the Federal Trade Commission found that one in five consumers had an error on at least one of their credit reports.
To review your credit reports for errors, start by visiting annualcreditreport.com. This is the only website that’s federally authorized to provide free credit reports. Look through each report for mistakes such as incorrect name or address, credit lines that don’t belong to you, duplicate entries, incorrect account status and other errors that could lead to a lower score.
Since each credit bureau collects and reports credit information independently, you’ll need to check all three reports. If you find a mistake, you’ll also need to dispute it with each bureau. Each one has a slightly different process for disputing errors, but instructions can easily be found on their websites.
2. Pay down some debt.
Once you’re sure that your credit reports are up-to-date and accurate, look for ways to reduce the amount of debt you owe.
One of the major deciding factors in applying for a mortgage is your debt-to-income ratio. This number measures how much of your monthly income goes toward paying back debts.
“If you can pay off a loan, that loan’s monthly payment goes away, improving your debt-to-income ratio,” said Justin Pritchard, a certified financial planner and owner of Approach Financial in Montrose, Colorado. “Lenders prefer that your total debt payments take up a relatively small portion of your total monthly income. Eliminating a payment may help you qualify for a loan.”
And though DTI doesn’t directly affect your credit score, paying down outstanding debt does. That’s because “amounts owed,” also known as your credit utilization ratio, makes up 30% of your FICO score. The more of your available credit you borrow against, the more it can negatively affect your score. So again, by reducing how much debt you have to your name, you become a much more attractive borrower.
3. Ask for a credit limit increase.
In addition to paying down debt, another easy way to improve your score instantly is by getting a credit limit increase. While this won’t change your debt-to-income ratio, it will lower your credit utilization since your outstanding debt remains the same while your available credit increases.
Keep in mind that credit card issuers will sometimes run a credit check before granting a credit limit increase. Doing so results in a hard inquiry on your credit report, though just one inquiry will have a negligible impact.
4. Get added as an authorized user.
Another way to instantly improve your credit is by piggybacking on someone else’s. If you have a family member or a close friend with excellent credit, you could ask them to add you as an authorized user on one of their credit cards.
When someone adds an authorized user to a credit card, that account’s information is reported on both people’s credit reports. If you’re added to an account with a long, clean history, it can bump your score a bit higher. The best part is, you don’t actually need to use the credit card or even know the card’s information. The primary account holder’s activity will automatically transfer to you, too.
Just keep in mind that you’ll need to share both the good and the bad of that account. If the primary holder misses a payment or maxes out the card, you’ll suffer the consequences as well.
5. Consider a credit-builder loan.
If you have limited experience with different types of credit, a credit-builder loan might help you diversify your credit mix — which accounts for 15% of your FICO score — and bump up your score a bit.
“These small loans, which are typically less than $1,000, aren’t really loans at all ― at least not in the traditional sense,” said Marineau, the vice president at Credit Karma. “The financial institution deposits the loan amount into a locked savings account you can’t access, and over the next six to 24 months, you pay off the loan just as you would with any other loan. Once the loan is fully paid off, the accumulated money is returned to you in total.”
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