It’s spring training time! With baseball and the summer home-buying season right around the corner, it’s also a great time to start training to grow your credit score. Even if yours is bad, poor, or fair, here are some ways to bring your credit score out of hibernation and knock it out of the park when applying for a mortgage.
Stay on top of bill payments
Typically, most lenders report your credit info to the credit bureaus on a monthly basis based on your billing cycle or statement date. Payment history has the biggest effect on your credit score1 and is the quickest way to boost it. Payments more than 29 days late can be reported to the credit bureaus and will hurt your score.2 Setting up automatic payments is a simple way to make sure you never miss one.
Use credit wisely
Building good credit is more than just paying your credit card bills on time. How much credit you have and how much you use your cards impacts your score, too. To help grow your credit score, try to use less than 30% of your limit on any given card. In this case, lower is better. People with higher credit scores tend to use less than 7% of their available credit.3 Keeping balances low works in your favor when credit bureaus calculate your score. Try to pay down balances early before bills are due or pay throughout the month to keep your balance low.
If you have a low credit score or need to establish new credit, you might want to check into getting one of the ‘credit builder’ cards now available. A quick Google search will give you more information about how they work and if applying would be a good option to help you improve and grow your credit score.
Limit inquiries and credit checks
As you work on your credit, it’s only natural to want to keep tabs on your progress. Unfortunately, every time you request a credit report it may negatively impact your score. To avoid this catch-22, check into signing up for one of the numerous free credit score services available. This way you’ll have a better idea of your chances of being approved before you actually apply for credit or a loan. Many provide unlimited access to your credit score without lowering it. Just be sure to read the ‘fine print’ to make sure there are no strings attached to your ‘free’ report.
As much as they like to see you have credit, too many inquiries or credit checks can be a red flag to credit bureaus. Every time you apply for a new loan or line of credit, a ‘hard’ inquiry is added to your report. This happens when lenders need top pull a full credit report from all three credit bureaus to approve you. To avoid getting dinged on hard credit pulls, when applying for a mortgage, check with your lender about getting pre-qualified first. To do so, lenders have the ability to do a ‘soft’ inquiry, which is a single report and score from one bureau. Soft pulls won’t affect your score. (Note if you’re pre-qualified for a home loan and decide to move forward with it to purchase a home, your lender will then need to pull a full credit report to start the actual loan application for approval.)
Get pre-qualified first
Speaking of mortgages, you could get pre-qualified quickly and easily with Offerpad Mortgage LLC* – without your credit report being dinged. The approval process varies depending on individual needs and circumstances, but we offer lending services and loans to help anyone in almost any situation (including those looking to improve their credit) with:
- Mortgages for first-time buyers
- FHA/VA/USDA/conventional mortgages
- Down payment assistance programs
- Lock-and-shop interest rate protection
- Mortgage insurance avoidance with as little as 10% down payment
- Jumbo loans up to $3.5M
- Bank statement loans for self-employed borrowers
- Interest rate rollback programs
You can also get big discounts when bundling a home loan through Offerpad Home Loans with Offerpad home buying and selling services. Combining two or more of our services can save you some serious cash (how’s up to $4,000 sound?). Use that money to reduce your down payment on a new home, pay closing costs, or buy down the interest rate on your mortgage. Talk to an Offerpad Loan Specialist for details.
*Offerpad Home Loans not available in all states. Rates, terms and availability subject to change without notice. All loans subject to credit approval. Mortgage brokerage services provided by Offerpad Mortgage, LLC (NMLS#2087710).
1 https://www.investopedia.com/how-to-improve-your-credit-score-4590097
2 https://www.experian.com/blogs/ask-experian/when-do-late-payments-get-reported/
3 https://www.nerdwallet.com/article/finance/raise-credit-score-fast