Being a first-time homebuyer is tougher these days, as banks and mortgage lenders are tightening their lending standards. While credit requirements for a mortgage can vary, a credit score of 620 is typically the minimum credit score needed for a conventional loan. However, lenders are raising the required minimum credit score and are now looking for at least a 700 credit score from new borrowers.
So, if you’re exploring the housing market and looking to buy soon, you may need to boost your score fast to meet these new requirements. Check out these strategies for how to increase your credit score quickly, so you can move forward in your home buying journey.
Clean Up Your Credit Report
First, find out your credit score by getting a credit report. There are sites where you can get a free credit report. They provide credit reports from the three credit bureaus Equifax, Experian, and TransUnion at no charge to you. You will then need to look through those reports, inspecting them for mistakes. Errors could include an incorrect name or address, credit lines that don’t belong to you, duplicate entries, and incorrect account status.
Pro Tip: Correcting errors on your credit reports are not only important to your credit profile but it is also your legal right as a consumer to have any accounts on your credit report, reported accurately.
Lower your credit utilization ratio.
It’s recommended to keep your total credit utilization ratio below 30%. So if your credit utilization rate is high, paying down your credit card debt is a quick way to lower that rate, boost your score, and proceed in your home buying process.
You can also make multiple payments to your credit accounts. You can keep charging everything to your card, but make payments at least twice a month to keep your balance low, which will result in lowering your credit utilization ratio.
Also, when your credit limit goes up and your balance stays the same, it immediately decreases your utilization. Of course, this only works if you keep your balances low.
Pay Bills on Time
No strategy to bump up your score will work if you end up paying your bills late. Why is this? Your payment history makes up 35% of your credit score ― the most heavily weighted factor. So not making payments on time is the single worst thing you could do. Reminder – you’ll want to pay all bills on time. Not just credit card bills, but also your student loans, rent, utilities, phone bills, and so on.
Unfortunately, there’s no way to predict the exact timing for when your credit score will go up or by how much. By following these steps you should be well on your way to improving your score and purchasing your first home. Contact us on our website or give us a call at 757.452.8974 today!