Check Your Credit Score

Your credit score is one of the key factors that lenders will consider in offering you a mortgage loan. Different lenders and mortgage types will have different minimum scores required, but the higher your score, the better your rates. A score of over 800 is considered excellent and any score over 720+ is very good. To get a mortgage you'll need at least one borrower with a score higher than 680 as a general rule, though some lenders do work with people who have scores of 600-679.

Fortunately, checking your credit score is easy. Your bank may offer free credit reports, or you can use a service like Credit Karma or Borrowell to see your score and your credit report.

Not quite as high as you'd like? Here are a few tips to raise your credit score.

  • Make all your payments on time. Payment history makes up 35% of your score, and even one missed payment can drop your score significantly. If you have any unpaid collections on your report, you definitely need to settle those before you can be approved for a mortgage.
  • Keep your credit utilization low. This is the second most important factor in your credit score. Your total debt divided by your total credit limit across all accounts should definitely be below 30%, but lower is better. You can do this by paying down debt, avoiding adding to your balance, not closing credit accounts, and maybe accepting credit limit increase offers for your accounts, but...
  • Avoid new credit inquiries. Now is not the time to apply for new credit cards or auto loans, as each 'hard inquiry' made by another lender can ding your score a bit. However, checking your credit on a free service like Credit Karma is a 'soft inquiry' which doesn't affect your credit.
  • Have a diverse mix of credit types. If you're close to buying, this won't be a good tip for you (see above!) but having a mix of revolving credit like credit cards, installment loans like car loans, and open status accounts like phone bills looks good to lenders.
  • Keep your oldest accounts open. The older your total credit history is, the better. If your credit history is too recent or you have no credit history at all, you may be required to have a cosigner or wait until your credit is more established before you're approved for a mortgage. You may also be able to access special programs for new immigrants, if that's your situation.
  • Check your credit report for anything that's not accurate. If there are any accounts that aren't yours or other issues, you'll need to dispute that with the credit bureaus.

It may take a few months to raise your score. If your score is low and you can make big changes to 1 and 2, you may be able to improve it significantly pretty quickly.