In today’s market, your credit score is more important than ever. A difference of just a few points can mean a lower interest rate saving you thousands of dollars over the life of a loan or the difference between an approval and denial of your loan application.

That is why doing everything possible to maintain a good credit score or boost it in the months leading up to applying for a home loan is so important.

Here are five things to consider that could potentially boost your credit score:

Check the Accuracy of Your Credit Reports

By law you are allowed to request one free credit report each year. So request your credit report several months before you intend to apply for a loan. According to an eight-year study released by the FTC, 25% of consumers identified errors when they reviewed their credit reports. That’s a staggering number when you consider that even a small error can have a significant impact on your credit score.  So dispute inaccuracies in your report and keep in mind that credit monitoring agencies are required to address any disputes in a timely manner.  Make sure to review your report from all three credit agencies for accuracy.

Reduce Your Credit Card Balances

Lenders typically consider large credit card balances as red flags. If you use credit cards regularly and don’t pay off the bills each month, try to reduce your outstanding balances to no more than 30% your borrowing limit.  Ideally, this should be done at least a few months prior to applying for a loan.

Ask for Late Payment Forgiveness

At one time or another, most of us have been late paying a bill.  Most people are unaware that they can request a “goodwill deletion” from a company and remove the black mark from their credit report entirely. Many companies are willing to do this for customers, especially if the late payment was a one-time occurrence.

Keep Your Accounts Open

Reducing credit card debt is good; but closing credit card accounts can be bad. Length of credit history factors into your overall credit score and can account for as much as 15 percent of the total number. So if you close old, established credit accounts, your credit score could suffer even though you have less debt.

Pay All Bills on Time

Recent activity is weighted more heavily in credit scoring than things in the past.  So even if you had previous dings your credit history, by paying your bills on time and in full now, hopefully for several months before applying for a loan, your credit profile may improve.  This will demonstrate to lenders that you a responsible credit risk and may also slightly boost your credit score.

Because repairing damaged credit takes time, it is wise to get started early – at least three to six months before you plan to buy a home.  That will give your efforts time to bear fruit. If you are ready to act soon, contact me today for a consultation. I will happy to answer any questions you may have and/or help you find your dream home.

Allyson Hoffman, ABR, ACRE, CDPE, CRS, e-PRO, GRI, SFR, SRES
RE/MAX Villager
Serving Chicago's North Shore, North and Northwest Suburbs
[email protected]

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Allyson Hoffman is your ultimate real estate resource for Chicago's North Shore, North and Northwest Suburbs and surrounding areas. Visit my website for detailed information regarding today’s real estate markets.

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