How to Improve Your Credit Score for Better Mortgage Rates

Your credit score is one of the most critical factors in determining your mortgage rate. Even a small improvement can save you thousands of dollars over the life of your loan. Here’s how to boost your score before applying for a mortgage.

Check Your Credit Reports Regularly

Start by obtaining free copies of your credit reports from all three major bureaus (Equifax, Experian, and TransUnion). Review them for errors and dispute any inaccuracies immediately.

Pay All Bills on Time

Payment history accounts for 35% of your credit score. Set up automatic payments or reminders to ensure you never miss a due date. Even one late payment can significantly impact your score.

Reduce Your Credit Utilization

Keep your credit card balances below 30% of your available credit limit. Ideally, aim for 10% or less. High utilization suggests you’re overextended and can hurt your score.

Don’t Close Old Accounts

Length of credit history matters. Keep your oldest credit accounts open, even if you don’t use them regularly. Closing them can shorten your credit history and lower your score.

Avoid Opening New Credit Accounts

Each new credit inquiry can temporarily lower your score by 5-10 points. Avoid applying for new credit cards or loans in the 6 months before applying for a mortgage.

Pay Down Existing Debt

Focus on paying down high-interest debt first. Lower balances improve your credit utilization ratio and show lenders you’re responsible with credit.

Consider a Credit Builder Loan

If you have limited credit history, a credit builder loan can help establish a positive payment history and improve your score over time.

Monitor Your Progress

Use free credit monitoring tools to track your score improvements. Small, consistent improvements can add up to significant savings on your mortgage.

Ready to check your credit and get pre-approved? Contact American Modern Mortgage for a free credit review and consultation.