![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2019\/08\/improve-your-credit-score-before-buying-home.jpg\")
<\/a>Why your credit score is important<\/h2>\n
Before we dive into how to improve your score, it\u2019s probably a good idea to cover why your credit score is so important for home buying.<\/p>\n
So, here\u2019s the deal: Your credit score is generally tracked by companies called \u201ccredit bureaus.\u201d The three major credit bureaus (those you\u2019ll find on most credit reports) are Experian, TransUnion and Equifax.<\/p>\n
Credit scores range from 300 to 850 and provide an overall measure of your track record for managing and paying off debts. The debts affecting your credit score can include credit cards, car loans, student loans, medical bills, and personal loans, among others.<\/p>\n
A strong credit score — typically anything 700 or over — shows that you pay your bills on time each month, and that you\u2019re unlikely to default on your payments.<\/p>\n
This is music to a lender\u2019s ears because ultimately, they\u2019re taking on financial risk to loan you money. Especially when you\u2019re talking about a home loan that\u2019s hundreds of thousands of dollars.<\/p>\n
That\u2019s why it\u2019s crucial to get your credit score up as high as you possibly can before applying for a mortgage (and you\u2019ll need to keep it there throughout the lending process). You want to show your lender that you\u2019ll be an upstanding borrower, and that you can be counted on to pay off your debts.<\/p>\n
Aside from appealing to lenders, a good credit score will get you a better rate on your mortgage, saving you thousands over the life of your loan. Typically, the lowest mortgage rates are available to borrowers with credit scores of 740 or higher.<\/p>\n
Meanwhile, a lower credit score will result in a higher mortgage rate, which unfortunately means you\u2019ll pay more for your home over time. Not only that, but a lower score will likely require you to make a bigger down payment on your new home.<\/p>\n
What makes up your credit score<\/h3>\n
Okay, you know your credit score is important. But do you really know what\u2019s packed in there? Few of us really ever consider how our scores are calculated, but it\u2019s crucial to understand how the sausage gets made if you want to make improvements.<\/p>\n
No credit bureau is going to tell you precisely how they calculate your credit score, but according to Experian<\/a>, the calculation breaks down something like this:<\/p>\n Make sure to keep these elements in mind as you work to improve your credit score. They can help guide you on where to prioritize your time (and money!).<\/p>\n Now that you\u2019ve got a basic understanding of what goes into that magic number called your credit score, we\u2019ve rounded up the top 6 need-to-know tips to get you financially fit for home buying.<\/p>\n The first step to improving your credit? Knowing what you\u2019re up against. That means pulling your credit reports from all three major bureaus and going through each one with a fine-tooth comb.<\/p>\n Keep in mind that you\u2019re entitled to pull your credit report from each of the three major credit bureaus for free once per year. Use them! You can get your free credit reports at Annual Credit Report<\/a>, a government-run site.<\/p>\n Of course, you can always get a free estimated credit score from companies like Credit Karma. But it\u2019s best to see your official credit reports from the big three credit bureaus. This is what your mortgage lender will reference, so you should too.<\/p>\n Credit score estimators, while great tools, can be off-base. We\u2019ve seen it way too many times: a homebuyer will apply for a mortgage based off a score they found on a credit score estimator tool, and then learn the hard way\u2014after applying for a mortgage\u2014that their true score was lower. Don\u2019t let this happen to you!<\/p>\n By working from your official credit reports, you\u2019ll go into the mortgage process with eyes wide open.<\/p>\n Now that you\u2019ve got your credit reports handy, you can focus on fixing the items that are bringing your score down.<\/p>\n Go through each of your three reports line by line. Verify that all the information is correct, and highlight any accounts or line items that are negative or inaccurate. These are your areas for improvement.<\/p>\n Did you know that credit report errors are extremely common? According to recent government data<\/a>, more than 1 in 5 Americans have material (read: pretty major) errors on their credit reports.<\/p>\n Credit report errors can affect your ability to get a mortgage, and can hurt your rate too. The good news is, you have recourse. Every consumer is entitled to dispute an error on their credit report. And both creditors and credit reporting agencies are required by law to correct your report if an error is found.<\/p>\n If you see an error on your report, you should dispute it as soon as possible. To do this, send a dispute letter to the credit bureau that made the error requesting that it be removed (the government put together a handy dispute letter template<\/a> you can use).<\/p>\n Include any supporting documentation proving the error was made. By law, the credit bureaus are required to investigate an error within 30 days, and remove the error if the creditor can\u2019t verify the accuracy of the disputed item.<\/p>\n They\u2019re also required to send you the results of the investigation, plus a copy of your credit report if a change has been made. You should also send a dispute letter<\/a> to the creditor who made the error, providing the same supporting documentation you sent to the three credit bureaus.<\/p>\n One caveat:<\/b> When you dispute an error on your credit report, the credit bureaus will list the account as \u201cdisputed\u201d on your reports. This dispute is visible to anyone who views your credit report.<\/p>\n\n
\n
\n
\n
\n
\n
<\/a>1. Check your credit reports<\/h2>\n
Skip estimator tools<\/b><\/h3>\n
2. Identify and fix issues with your credit reports<\/h2>\n
Always dispute credit report errors<\/b><\/h3>\n
How to dispute an error on your credit report<\/h3>\n