Thinking about buying a house, but your credit score doesn’t quite meet the required standard? You’re not alone. Half of the nation’s consumers have the desired 700-plus credit score, while the average is 695. And while you can obtain a mortgage with scores in that range, you’ll need a 740 or above to get the optimal rates. If you’re wondering how you can improve your credit score fast before applying for a mortgage, Realtor.com offers these tips that can help you see a change in your score for the better in just one or two months…and sometimes even sooner.
Pay down your balances. This could have the biggest—and fastest—impact on your credit. Credit utilization (the amount you can borrow versus the amount of debt you’re carrying) accounts for 30 percent of your credit score. And the more available credit you have, the better. If you have the cash on hand, try to time your payments so you’re reaping the credit-reporting benefits. To optimize your utilization, use a credit card and pay down your balance to 1 percent of your credit limit right before your bank reports to the credit bureaus. That way it’s clear that you are using the card, but your balance is as low as possible.
Make sure your bills are current. Paying bills on time is the most important factor in a credit score. If you’re already late on a payment, you’ll want to make sure you pay as quickly as possible to boost your credit. If you’re less than 30 days late and you can make the payment today, do it. Creditors don’t typically report until after the 30-day mark.
Open a new account. This can help in two ways. First, opening a new credit card will increase your total outstanding credit line, which should improve your utilization. Second, if you have only one type of credit card or a small loan, opening another type (such as a store card) can help your “credit mix”—a term credit bureaus use to indicate whether a person can handle different types of accounts. Try opening just one new account at first. If you apply for a card every time you’re asked, you’ll take a hit on the number of recent inquiries. And that won’t look good.
Become an authorized user. If you have a responsible partner or family member, then becoming an authorized user on one of their accounts will allow you to piggyback on their good credit history. The full history of the older, established credit account will show up on your credit report immediately and result in an increase in the average age of accounts you’ve managed (which also increases your credit score). However, be careful to make sure the person you choose actually pays his or her bills on time and keeps the debts low, because bad credit history will show up, too.