Mortgage, Credit, Financing, Buying a HomeUncategorized July 14, 2022

Ways to Improve Credit

Improving Credit will help get a lower mortgage rate.

credit cards in pocket

credit cards

Building a strong credit profile can increase your chances of qualifying for a mortgage and reduce the interest rate charged by the loan. When applying for a mortgage, your credit report will be used to determine whether you qualify for a home loan and what interest rate will be applied.

Here are 5 effective ways to boost your credit and get a lower interest rate on your mortgage:

  1. Read up on your current credit standing

A crucial step of improving your credit is conducting research on your current rating. By doing so, you’ll be able to review, identify, and understand the factors that are affecting your credit and possibly preventing you from getting the rates you want. Remember, a poor credit history can result in a poor interest rate or even a declined application.

To learn more about your current credit standing, find your credit report through a credit bureau such as or When viewing the report, make sure you pay attention to your high account balances contingent on your credit limits. In addition, make sure you take note of your current FICO® score.

Pro-tip: Make sure the credit bureaus’ report accurately reflects your credit history. However, it is important to note that if you receive multiple reports through different platforms, there may be subtle differences.

2. Avoid swiping that credit card

In the months leading up to submitting your application for a home loan, avoid using your credit card when possible. When you charge your credit card, it increases your outstanding balance and as a result you have lower available credit. Credit utilization, or your utilization rate, is a big determining factor of your FICO score. Your utilization rate is determined by the percentage of credit you’re using at any given time, which by extension can increase your debt-to-income ratio.

3. Increase the credit limits on your credit cards

Before you apply for a loan, you can request to increase the credit limit on the credit cards you have currently open. To do so, simply contact your credit card issuer for a credit line increase either online or over the phone. Doing this will reduce your utilization rate and cause your credit to increase over time. Information about your issuer’s credit limit increases may be found via the issuer’s online website. Remember to come prepared with your gross annual income and current monthly housing and interest rate.

After you provide this information, the credit bureau will determine if they can offer you an increase on your credit limit.

Pro-tip: This inquiry can temporarily affect your credit score. To avoid it affecting your home loan, make sure to inquire about this increase 3+ months in advance of submitting your mortgage application.

A credit limit increase can lower your credit utilization rate and result in a lower debt-to-income ratio, which is looked favorably upon by credit bureaus and mortgage lenders. By extension, it is easier to get a credit limit increase approved if you have low balances on your credit card. Essentially, this ensures that you’ve considered a low-risk borrower.

The caveat here is that a credit limit increase could possibly result in a hard inquiry into your credit history, which could temporarily cause a slight dent in your credit score. This can be alleviated by simply requesting the limit increase in advance of applying for a mortgage. You can find out how this will affect your credit score by contacting your credit bureau. Typically, however, any damage is short-lived.

4. Pay down your balances

Just as you should lower your spending, it’s important to pay down your existing balances before applying for a mortgage. This can be anything from existing loans to any credit card balances you can reduce. This will indirectly lower your DTI ratio, which may raise your credit score and enable you to receive a better available mortgage rate when applying for a home loan. In addition, you can potentially even qualify for a greater mortgage or a larger home.

5. Start saving!

Like any large purchase, a home requires an abundance of savings beforehand. This is why you’ll want to avoid large credit card purchases, refrain from taking on any additional debt, and reduce unnecessary spending before you apply for a home loan.

Pro-tip: If there’s a home purchase or a refinance on the horizon, put the credit card away! Practice frugality before and during the mortgage process, and don’t stop until the loan is funded!

You’ll need to practice patience and wait to resume any superfluous spending until your home loan is funded. Furthermore, the same can be said of spending an abundance of cash beforehand, as it can deplete your assets!

Before you apply for a mortgage or refinance, set aside money in a verifiable account several months in advance.

Keep in mind that when you apply for a mortgage, your credit report is a major determining factor of your applied interest rate and the acceptance of your application! By creating a strong credit profile, you’ll increase your chances of being approved for a mortgage and locking in a lower interest rate on your loan.

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Please connect with me for any questions or for more information.

Rupa Nunamaker

Coldwell Banker Realty

call or text 727-430-2350

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