Why Your Score Matters
Your credit score directly affects your mortgage interest rate. The difference between a 680 and a 740 score can mean 0.5% to 1% in rate difference. On a $350,000 loan over 30 years, that is $35,000 to $70,000 in additional interest. A few months of credit work can save you real money.
Check Your Reports First
Pull your free credit reports from all three bureaus at annualcreditreport.com. Look for errors: incorrect balances, accounts that are not yours, and late payments that were actually on time. Disputing errors is the fastest way to improve your score.
Pay Down Credit Card Balances
Credit utilization (how much of your available credit you are using) accounts for about 30% of your score. Getting your utilization below 30% helps; below 10% is ideal. If you have $10,000 in available credit, keep your balances under $1,000.
Do Not Close Old Accounts
The length of your credit history matters. Closing an old credit card shortens your average account age and reduces your available credit, both of which can lower your score. Keep old accounts open, even if you do not use them regularly.
Avoid New Credit Applications
Every hard inquiry (credit application) can lower your score by a few points. In the six months before you plan to buy, avoid opening new credit cards, financing furniture, or co-signing loans. The exception is mortgage shopping: multiple mortgage inquiries within a 45-day window count as a single inquiry.
