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Buying a Home? Improve Your Credit Score First.

June 1, 2021
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Focus on improving your credit and getting into great financial shape with tips from DCU before applying for a mortgage.

House hunting is all about finding the right home at the right price for you. But before making an offer or applying for a mortgage, it pays to check your credit score first. Knowing your score and taking steps to boost your credit before you apply can help you get the best deal on your mortgage. 

Your credit score is a significant factor in qualifying for a mortgage and determining your interest rate. A higher credit score helps you qualify for better mortgage rates, potentially reducing your monthly payment and saving you money over the life of the loan. Making the right moves can help your credit score in the months and years ahead. Even if you’re on the verge of applying for a mortgage, there’s still time to improve your credit.

Smart Moves for a Better Credit Score

Working on your credit score before applying for a mortgage gives you an edge. Here are some simple tips to help you improve your credit score:

Check your credit report. Don’t be caught off guard by surprises on your credit report when applying for a mortgage. Review the information on your report now so you have time to resolve errors and dispute fraudulent activity. You can access your free credit report at annualcreditreport.com.^

Pay bills on time. Late or missed payments show up on your credit report and bring down your score. Making payments on time is one of the best ways to improve your score. Set up automatic and recurring payments for bills, credit cards, and other loans so you don’t miss a payment.

Keep balances low. Credit utilization (the amount of debt you have compared to your available credit) is a major factor in determining your credit score. Paying down balances on your credit cards and other loans can help your credit score. This is a relatively quick and easy way to make a positive impact on your score.

Keep old accounts open. Credit history is another important factor in your score. Building credit history takes time and there’s not much you can do to speed the process. However, you can make a point to keep your oldest accounts open. If you’re thinking of applying for a mortgage anytime soon, avoid closing credit card accounts that show a long history of responsible use. 

Avoid taking on new debt. Applying for new credit cards and loans requires lenders to make a hard inquiry into your credit. Each time this happens, your credit score goes down temporarily. That’s why it’s best to avoid applying for new credit if you’re preparing to buy a home or refinance your mortgage.

Monitor Your Credit Score

Position yourself for success by monitoring your credit score through DCU’s Online Banking. Opt in to get your FICO® Score delivered to your inbox each month and watch your score increase as you take steps to improve your credit. Visit Account Manager via Online Banking to sign up for this free service.

Visit dcu.org to join DCU and discover more ways to improve your financial life.

^A note about third-party links: By selecting certain links in this article, you will enter a website hosted by an organization separate from DCU. We encourage you to read and evaluate the privacy policy of any site you visit when you enter the site. While we strive to only link you to companies and organizations that we feel offer useful information, DCU does not directly guarantee claims made by these sites.

This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.