Improving your credit score before you buy a home is a great way to make sure that you get the best interest rate and terms on the loan. No one wants to pay more than they have to for a loan. If you are thinking of buying a home, consider these creative ways to boost your credit score.
Find Ways to Increase Your Income
If you already work full-time, you probably think you’ve maxed out your income, but there are other ways to increase it. Increasing your income can help you pay off your debts faster, which in turn, will help increase your credit score.
Consider any of the following ways to get more income:
- Start a side gig out of one of your hobbies
- Get a part-time job
- Start a freelance business as a writer, virtual assistant, or transcriptionist
- Sell items online (garage sale style)
Any extra money you make should then go towards your debts. The idea is to get your credit cards down to at least 30% of your credit card balance. Ideally, though, you should pay them off in full to really boost your credit score.
Dispute Errors on Your Credit Report
Have you checked your credit report lately? If you haven’t, you may not even know if there are errors reporting on it. Even the smallest errors can knock your credit score down more than you’d like.
Take the time to pull your free credit report from each bureau and review it. If you find errors, you must contact the credit bureau reporting it in writing. You will also need to report it to the creditor reporting the issue. The credit bureau has 30 days to look into the matter and come up with an answer. If they reverse the issue on your credit report, your credit score will likely increase just from this simple step.
Ask Your Credit Card Company for a Credit Line Increase
Your credit card company may give you a credit card increase just for asking. You don’t have to wait until they offer it to you. Before you do, make sure that your credit card balance is just a small fraction of your available balance (if any). Also, make sure that you have paid your credit card bills on time. The credit card company will use these factors as they decide if you qualify for a higher credit line.
If you do get the higher credit line, it automatically decreases your credit utilization rate. The utilization rate has a large effect on your credit score. Lower that rate can automatically help increase your credit score.
Pay Your Credit Cards Early
Even if you pay your credit cards off in full each month, if the company reports your balance before your due date, you may have higher balances reporting on your credit report than you think. One way around this is to pay your balances early. If you have the money before the due date, pay it.
If you don’t have the full amount, go ahead and make partial payments throughout the month. This will at least cut your balance down. When the credit card company reports your balance to the credit bureaus, the balance will be lower. Again, this will affect your credit utilization rate, which can mean a higher credit score just for making your payments early.
Ask your Landlord to Report Your Rent
Rent isn’t normally reported to credit bureaus, but your landlord does have the option to do so if he wants. If you make your rent payments on time each month, this can have a positive effect on your credit score.
Ask your landlord if he is willing to do so just so that you have enough trade lines and a high enough credit score to qualify for a mortgage when you are ready to buy a home. This also makes it easier to apply for the mortgage because you will have an official history of your housing payments.
Don’t Close Old Accounts
Your old accounts may seem like a nuisance. You may even think they bring your credit score down, but the opposite is actually true. The older your accounts are, the more they help your credit history. Lenders like to see old, established credit lines. This helps them see that you are a good risk. Even if the balance is zero, it shows that you are financially responsible. The younger that your credit age is, the higher the risk you pose to a lender.
These simple steps can help boost your credit score before you buy a home. Consider taking action at least one year before you plan to buy a home. This gives your credit long enough to react to the changes that you make. The more time you give your credit score to increase, the better your chances of obtaining the best interest rate and fees available to you.