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We all know credit score matters when buying a home. No real way to get around that fact. However, there are ways to plan and act if need be to improve your credit and put yourself in a better place for buying a home. 

Your credit score is the overall way the three main credit bureaus, Experian, TransUnion and Equifax, track your record for managing your debts. This, of course, includes how you pay off your debt. A decent score (anything above 700) shows creditors and lenders that you pay your bills on time each month. This in turn shows lenders you’re not likely to have to default on a loan. You are a good investment to them and giving you a mortgage isn’t a huge risk for their institution. 

You want to have your credit score as high as possible before applying for a mortgage. But you also want to keep it steady throughout the process of getting approved and buying a home. More on that below.

While this doesn’t happen overnight, there are steps you can take now if you’re worried about your credit. 

Pro Tip: Start thinking about all this early on as you don’t want to be making changes to your credit or adding new lines of credit while you’re applying for a mortgage. Making changes and adding credit can negatively affect your credit in the moment, before ultimately working to improve it. So start early if you’re concerned. 

There are a few components that make up your credit score. And focusing on these can help you understand how to improve it. 

Let’s start with payment history. This one is exactly what it sounds like. If you pay at least the minimum payment on all your debts each month, you’re doing fine in this area. To improve, pay special attention to making those minimum payments on time for all loans including credit cards, car payments, and student loans. 

The second aspect to a credit score is utilization. This has to do with how much credit you’re using out of how much is available to you. Typically, you want to be on the lower side of utilization. So if your credit card has a max of $15,000, it’ll reflect better on your score to only be using $2,000 of that rather than $10,000. If you have significant debt out of what’s available to you, consider trying to chip away and get that number lower to improve your score. 

Another part of credit score is history of credit. How long have you been utilizing credit? This speaks to your overall ability to take on debt and then successfully manage and pay that off. If you had no real debt until a couple months ago, this could mean your credit score is rather low. But through time and consistently making payments, it will improve. 

One of the last couple portions that make up your score is having a mix of different types of credits. It actually reflects well on your score to have multiple kinds. So, for example, successfully making on-time payments on a car loan, a student loan and a credit card over time will boost your credit more than only having a credit card. It seems counterintuitive that these bureaus want you to have more debt. But they’re assessing how you can handle different contracts and adhere to those terms for each type of debt. 

The last note was mentioned before. You don’t want to add new lines of credit leading up to applying for a mortgage. This can bring your score down temporarily. If your score is adequate, resist any type of new loan or debt while home shopping. If your score is low, first work on bringing your score up, but do it well before applying.

Get your credit score in check and then confidently apply for a mortgage. Best not to rush into it and get denied a loan. If you have concerns, it’s ok. There are concrete ways here to start working to boost your score.