Improving a credit score to buy a house can lower interest rates and make lenders more likely to approve an application. However, increasing credit scores requires research and a bit of work. To accomplish this goal, borrowers need to understand how credit scores are calculated.

Credit History and Repairing Past Mistakes

To improve a FICO credit score for mortgage lenders, start by cleaning up the credit history portion of a report. First, address any unpaid debt. Dispute negative entries in the report by mail or phone. Then, pay off anything still owing. These will stay on a credit report for seven years, but it will look better than if they're ignored.

Make sure bills are paid on time. Even if there has been a history of late payments in the past, a recent history of on-time payments will have a stronger impact than past events. Lenders also weigh positive entries in a credit report against negative ones.

Sometimes, credit history findings can be difficult to handle. They make it harder to keep up financially and may require planning. If handling these items becomes difficult, don't hesitate to contact each creditor or speak to a credit counselor. Neither of these options will be entered into the credit report, and they can make everything more manageable.

Credit Utilization Ratios and Reducing Debt Load

The second portion of a FICO score to address is the credit utilization ratio. Get rid of as much of the debt as possible starting with the highest interest rate items. Also, pay more than the minimum payment each month. This will help reduce the principal amount owing and looks fantastic to mortgage lenders.

Some people try opening new accounts to increase their available credit limits. While this does improve the credit utilization ratio, it also increases the number of items listed and the number of new credit entries. This doesn't generally look good to potential lenders. Consider being added to an existing account as an authorized user instead.

Credit Length and Credit Scores for Buying a House

Potential home buyers can't do much to lengthen their credit history, but they can make sure to start building it responsibly. Start by getting a credit card or loan and making monthly payments on time. By doing so, borrowers can show they are financially responsible right away. The same technique works for improving credit variety.

Credit Types and Creating Variety

It can be tempting to open more accounts to make a credit report seem more varied. However, this idea could have the opposite effect on anyone applying for a mortgage soon. Credit variety is something borrowers should keep in mind going forward or when building credit.

Anyone planning to buy a home soon should also avoid making big purchases or incurring substantial debts right before applying for a mortgage. This can call the stability of an applicant's current financial situation into question. It can cause lenders to reject the mortgage application.

Number of Credit Items and Reducing Credit Report Records

The last way to improve a credit score to buy a house is to reduce the number of items in the report. First, when rate shopping, do it all at once. This will reduce the time between hard credit checks. By timing the credit checks this way, the lender can see that the items listed were the result of rate shopping. The alternative is to avoid hard credit checks.

A report will list a hard credit check each time a lender pulls the record when considering someone for credit approval. The alternative is a soft credit check. These aren't listed in a report and don't affect a credit score. A soft check occurs when someone checks their own credit through a credit bureau or during the pre-qualification process.

It can be tempting to close accounts to improve credit scores and reduce the number of items listed in a report. However, this tactic doesn't generally work. The credit report will still have the accounts listed if they're closed, and it will affect the average age of accounts reducing credit history length.

Improving a credit score to buy a house can have significant advantages. However, this takes time, so potential home buyers should plan as much as possible. For particularly poor credit ratings, it may take more than seven years to fix past mistakes. In these cases, it may be worth considering a co-signer.