Four Tips to Get Your Credit Mortgage-Ready

Buying your first home is a big step, and we know preparing your finances for this kind of purchase can be intimidating. If your mind went straight to your credit score, you’re on the right track. Your credit score plays an important role in your financial life, especially in big purchases like a home. We’ve got 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, take advantage of this offer to monitor your finances regularly! Next, review your credit utilization ratio (the comparison between everything you owe and your total available credit). Experts recommend keeping your credit utilization ratio below 30 percent, so if your ratio is higher, you may have some work to do. Lenders want to know you have your spending and debt repayment strategies under control. Finally, if you notice any loans or credit accounts that shouldn’t be on your credit report, don’t be afraid to dispute inaccuracies with the relevant credit bureaus.

2. Maintain existing credit cards and keep balances low.

Closing credit cards and other lines of credit can lower your score by decreasing your total available credit. When preparing to buy a home, keep your existing credit cards open and keep their balances low. If possible, avoid opening new lines of credit as well. Making big purchases or taking out a new loan can impact your credit score before the homebuying process is complete. 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. Thirty-five percent of your credit score is determined by this factor, so making late payments can ding your score quickly. Need help remembering when everything is due? Most lenders offer automatic payment options. If you’re a Grow Financial member, schedule your payments in the Bill Pay or Transfers widgets in Grow Online and Mobile Banking.^*

4. Save for a down payment.

Your credit score can also impact your required down payment depending on the type of mortgage you’re applying for. A higher score can often mean a lower down payment. To make sure you’re ready whatever your downpayment, whenever you can, save, save, save! 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.

When making a big purchase like a home, your credit score is more important than ever. Having the best possible credit score can save you money by ensuring you get the lowest mortgage rate possible. 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? Don’t be afraid to get started today!

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