How to Improve Your Credit Score Fast for Your Mortgage Loan

June 22, 2020

A credit score isn’t everything. It doesn’t say anything about you as a person. It doesn’t imply anything to potential friends or partners. It doesn’t tell you if you’re good at your job. It’s just a number that gives a brief snapshot of your history with debts and credit.

But in the world of mortgages, a credit score is almost everything. Besides your debt to income ratio, your credit score is what determines both whether you qualify for a loan and how low your interest rate will be. Since you want to both qualify for a loan and you want to get the best interest rate possible, anything you can do improve your credit score – even by just a few points – has the potential to save you potentially thousands of dollars over the life of your loan.

What Determines Credit Score – and What Can Be Changed?

Your credit score is almost entirely determined by your payment history (whether or not you’ve paid your debts on time) and how much debt you have. There are many other factors at play, including how long you’ve had your debts, how much credit you have available, how often you apply to get credit, and more, but those two factors are the most important.

Some of those cannot be changed, at least not rapidly. But others can. The following are a few things you can do to improve your credit score fast and possibly get a better loan.

  • Pay Down What You Can – Because total debts are such a big factor, anything you can pay down by a decent chunk, even if it’s a few thousand dollars, could potentially give you a credit boost. This is especially true if you have any high balance credit cards or loans. Lowering that balance so that your card isn’t maxed out is a good way to get a quick burst.
  • Take Out a Debt Consolidation Loan – Generally, it’s not a good idea to take out any new debts when you’re applying for a home loan. But those that have a lot of credit card debt can sometimes see a massive boost if they take out a debt consolidation personal loan and wipe out all their credit card debt. Doing so also tends to give you a lower interest rate on your debt and a lower monthly payment, the latter of which can also help with your debt to income ratio and home loan approval.
  • Move Money Around – Though it is not ideal, there are situations where a person has one maxed-out credit card and one empty credit card. Speak to your lender about moving money around. In some situations, your credit score can improve if you take some of the balance from the maxed-out card and transfer it to an empty card. However, this is a case by case basis so it is better to ask your lender about this.
  • Fix Errors – Credit scores are imperfect measurements, and in some cases, they are prone to error. These errors may not have seemed important in the past, but when you are applying to a home loan they can be the difference between a great rate and not even getting a loan. So check your credit reports for both credit bureaus to see if there are errors.

If you’re thinking about owning a home, the sooner you start addressing your credit score and history the better the outcome will be. Talk to your lender first before making any changes to your debit/credit, and see what they advise. But if you’re looking for a way to improve your credit score fast, these tips are going to be your best bet. See what your lender recommends and make the changes you need to in order to get the best possible loan for you.

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