Buying your first home is a big step, and we know preparing your finances for such a major purchase can be intimidating. If your mind goes straight to your credit score, you’re on the right track. Your credit score plays an important role in your financial life, especially when making big purchases like a home. Here are four tips to help you get your credit mortgage-ready.

1. Check your credit report regularly.

Start by reviewing your credit report to get an idea of your credit health and where you can improve. Don’t forget: you’re legally entitled to access one free credit report per year from each of the three major credit bureaus at AnnualCreditReport.com. Regardless of your current score, remember to monitor your credit report regularly! If you notice any errors, dispute them promptly with the credit bureaus.

2. Maintain existing credit cards and keep balances low.

When preparing to buy a home, keep your existing credit cards open to maintain your credit history, but keep their balances low to improve your credit utilization ratio. Closing credit cards and other lines of credit can lower your credit score by decreasing your total available credit.

Once you’re preapproved for a mortgage, avoid making any big purchases or taking out new loans, as these can impact your credit score before you complete the homebuying process. We know how tempting it can be to start shopping for accessories for your potential new home immediately, but we promise it’s worth it to wait!

3. Pay your bills on time.

The most important factor in the calculation of your credit score is your payment history. Be sure to pay your bills on time to establish a consistent payment history. This factor determines 35% of your credit score, so making late payments can harm your score quickly.

Need help remembering when everything is due? Set up automatic payments. If you’re a Grow Financial member, schedule your payments using Bill Pay or Transfers in Grow Online and Mobile Banking.^*

4. Save for a down payment.

A higher credit score can often mean a lower down payment and better rates on your loan. While you’re working on your credit score, remember to save, save, save! Then, when you’re ready to finance your home, you’ll be prepared with the down payment, which can range from 1% to 20%, depending on the type of mortgage you choose. Maintaining a monthly budget can help you visualize your spending and save consistently. If you’re wondering where to start, we recommend reviewing the basics of budgeting.

For more help improving your credit, check out these good credit habits. Even if you aren’t ready to buy a home now, it’s important to understand that improving your credit score takes patience and persistence. Eager to get your credit mortgage-ready? There’s no better time to begin than today!

---

Posted In:

• Credit Education
• Home Education