Learning centerCredit
Improving Your Credit Before You Apply for a Mortgage
Your credit score affects which loans you qualify for and the terms you’re offered. A few months of focused effort before you apply can make a real difference. Here’s what goes into your score and how to improve it.
What goes into a credit score
FICO, the most widely used scoring model, weighs five factors:
| Factor | Share of a FICO score |
|---|---|
| Payment history | 35% |
| Amounts owed, including how much of your available credit you use | 30% |
| Length of credit history | 15% |
| New credit | 10% |
| Credit mix | 10% |
Source: myFICO.
1. Check your reports for errors
Get your free credit reports from all three bureaus at AnnualCreditReport.com. Look for accounts you don’t recognize, incorrect late payments and balances that don’t match. Dispute errors directly with the bureau that reports them.
2. Pay every bill on time
Payment history is the largest factor. Set up automatic payments or reminders so nothing slips. How much a late payment affects your score depends on your overall credit profile, how late it was and how recent it is, but avoiding new late payments is the single most important step.
3. Lower your credit card balances
How much of your available credit you use, called utilization, matters a lot. Paying down balances, especially on cards near their limits, can help your score relatively quickly.
- Focus first on cards with the highest balance compared with their limit
- Consider making payments before the statement date, so a lower balance is reported
4. Keep older accounts open
Closing an old card reduces your available credit and can shorten your credit history. If a card has no annual fee, consider keeping it open and using it occasionally.
5. Avoid new credit before and during your purchase
Each new application can cause a hard inquiry, and new accounts lower your average account age. Hold off on new cards, car loans and store financing until after closing. Mortgage inquiries within a short window count as one, so comparing lenders is fine.
6. Make a plan for collections and past problems
Ask your loan officer how any collections, charge-offs or past bankruptcies affect your options before you pay or settle anything. Sometimes the right order of steps matters.
7. Give it time
Some improvements show up within a month or two, as balances update. Others, like rebuilding after late payments, take longer. Starting several months before you plan to buy gives you the most room.
Not sure where to start? A loan officer can review your credit with you and point out which changes may matter most for your mortgage.
Talk to a Patriot loan officer
Every situation is different, and a short conversation is the quickest way to know what fits yours.
This article is general information, not an offer to lend or a commitment to lend. All loans are subject to credit approval, underwriting and property valuation. Belem Servicing LLC, NMLS ID #715386 (NMLS Consumer Access).
Sources
- myFICO, What’s in my FICO Scores?
- AnnualCreditReport.com, Free credit reports
- Consumer Financial Protection Bureau, What exactly happens when a mortgage lender checks my credit?