The type of credit score used by lenders can vary. One of the most frequently used scores is the FICO score. Your credit score should be at least be 640, but anything closer to 700 would be better. Remember, the lower the credit score, the higher the mortgage rate and fees you may pay, so you’ll benefit from increasing your score. You can read more about
how your FICO score is determined.
Tips to Improve Your Credit Score
Make Your Payments Promptly: Paying your debts on time is the most important factor in your credit score.
Pay Down Your Credit Card Debt: Your credit utilization ratio is another factor in your credit score. This ratio is calculated by dividing the total amount you owe on revolving accounts (credit cards, lines of credit, etc.) by the total of all your revolving credit limits. Using more than 30% of your available credit may lower your credit score. Pay down credit card balances to improve your score.
Refrain From Adding New Debt: Opening new credit cards or other loans can impact your credit score, so it's best to avoid opening unnecessary lines of credit while you're trying to purchase a home. Now, we're not saying you should walk to work every day instead of taking out a loan for a new car, but only borrow if you need to. Your score will go back up again if you make all your payments on time and refrain from applying for new debt, but this can take several months.
Limit How Much Your Credit is Checked: Did you know that your credit is checked each time you apply for a new loan or credit card? While it's only a minor hit each time, they add up.
Be Patient: Like most things in life, increasing your credit score doesn't happen instantly. The key is to practice good credit habits consistently. Get more tips on building and maintaining a good credit score.
We're here to help with every stage of the mortgage process, so feel free to contact us with any additional questions you have about building your credit score.