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When you apply for a mortgage, potential lenders will take a close look at your credit score. While your credit history isn’t the only factor they take into account, it’s one of the most important. A higher credit score can make a huge difference in the mortgage rate you are ultimately offered or even affect whether or not a home loan is approved.
This is why it is so important to do everything in your power to increase your score before you borrow. The good news is that there are actually a number of ways to increase that score quickly if you’re impatient to buy a home and want the best possible rate. Here are four.
1. Be added as an authorized user on someone else’s card
If you are added as an authorized user on an account, it will appear on your credit report. If the card has been open for a long time, has a high credit limit and low credit usage, and has a strong payment history, you’ll benefit from all of these things – each of which has a huge impact on your credit Goal.
2. Write a goodwill letter asking creditors to remove negative information
If you have black marks on your credit report that lower your score, such as late payments in the past, you can ask creditors if they would be willing to remove them voluntarily. This is sometimes called writing a goodwill letter.
Often times, if you still have an account with the company, and you’ve generally paid on time and been a good customer, the creditors will be willing to do you this favor. If you have an unpaid balance and are willing to pay it off in full if the creditor removes derogatory information, this can also sometimes be an effective tactic.
3. Correct any mistakes on your credit report
If there are any errors on your credit report, your score could drop due to someone else’s irresponsible behavior. You can dispute any errors or inaccurate information with any of the three credit bureaus – Equifax, Experian, and TransUnion. After an investigation, derogatory information should be removed if it was not legitimate, and your score will increase rapidly when it is.
4. Pay off the debt
One of the most important factors in determining your credit score is the rate of credit utilization, or credit used over available credit. It’s right after your payment history.
If you pay off some of your debt and improve your utilization rate, your score should go up. The impact of this decision – and to what extent it will change your score – will depend on how quickly you can repay a substantial portion of what you owe. As an added bonus, it will not only improve your credit, but also improve your debt-to-income ratio which mortgage lenders see as another key factor in mortgage approval.
By following these four steps, we hope you can qualify for an affordable home loan so that you can borrow to buy your dream home without spending a fortune on interest.
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