Ready To Buy? Check Your Credit Score First

When you are buying a home, your credit score is an important part of the overall process. Most home buyers will need a mortgage loan to complete their purchase. If your credit score has taken a few hits, it may be hard to get a loan with the terms you want. Here are five tips on how to boost your credit score as you begin your house hunt.

1. Know What Your Credit Score Is and Why
   Before you begin, pay to have your credit score and history pulled from the major credit bureaus. While you can get a free credit history once per year, you do need to pay a small fee to get the actual score. This is worthwhile, as it will show you exactly where you stand.
   
   
2. Dispute Any Errors
   According to the FTC, one out of every four consumers has an error on their credit reports. That means your risk of having one is pretty high. Not only should you check that the accounts listed actually do belong to you, but you also need to make sure that your credit limits are accurate. Higher credit limits will boost your score, so make sure that all your limits are accurately reported. If you notice errors, dispute them by making copies of everything, then sending your proofs with a dispute letter to the credit bureaus.
   
   
3. Bring Past Due Accounts Up to Date
   Do you have past-due accounts on your credit history? Start making those accounts current, and then get into a better habit of paying your bills on time. It won't take long for those accounts to improve your score once they are current. Because the length of the past due accounts makes a difference, work on the accounts that have the oldest "past due" dates first.
   
   
4. Avoid Opening New Accounts
   When you open a new credit card, the issuer will check your credit report using what is known as a "hard inquiry." These have a slight impact on your credit rating. Too many hard inquiries all at once will make your credit risk look worse than it is. While you are learning how to improve your credit score, avoid opening new accounts unless you have to.
   
   
5. Lower the Credit Utilization Rate
   The credit utilization rate refers to the percent of your available credit that you are actually using. A credit utilization rate of less than 20 percent is considered good, and if it rises above 20 percent, you may notice a drop in your score. You might be able to lower this quickly by transferring balances from accounts with low credit limits to accounts with higher credit limits.
   
   You can also lower this rate by asking for higher limits on cards you have had and paid faithfully for a while. Many credit issuers are more than happy to raise your limit with a simple phone call. If that does not work, figure out which accounts are the closest to their maximum, and start paying those down first. When you reach the right debt-to-credit-limit ratio, your scores will improve.

Learning how to improve your credit score is a valuable tool as you start your search for a new home.

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