How to Improve Your Credit Score Before Applying

Your credit score is one of the most important factors lenders use to determine your mortgage rate. A higher score means a lower rate, which translates to significant savings over the life of your loan. The good news is that with the right strategies, you can improve your score meaningfully in just a few months.

Understanding What Affects Your Score

FICO scores, the model most mortgage lenders use, are calculated based on five factors: payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%). The two biggest factors, payment history and utilization, are also the ones you have the most control over in the short term.

Quick Wins to Boost Your Score

If you are planning to apply for a mortgage in the next 3 to 6 months, focus on these high-impact strategies:

• Pay down credit card balances to below 30% of each card's limit. For the biggest score boost, aim for below 10%.
• Check your credit reports from all three bureaus and dispute any errors you find.
• Set up autopay on all accounts to ensure you never miss a payment.
• Avoid closing old accounts, as this reduces your available credit and shortens your average account age.

A borrower who improves their credit score from 680 to 720 could save approximately $150 per month on a $350,000 mortgage. Over 30 years, that adds up to over $54,000.

What to Avoid Before Applying

In the months leading up to your mortgage application, avoid any actions that could hurt your score. Do not open new credit cards, take out car loans, or make large purchases on credit. Even a single hard inquiry can temporarily lower your score by a few points, and multiple new accounts signal risk to lenders.