6 Steps to Build Your Credit Before You Buy a Home
Daniel ParkNo. 4
Updated
Key takeaways
- Payment history and how much of your credit you use are the two biggest parts of most credit scores.
- Check your credit reports for free and dispute any errors early.
- Keep card balances low, ideally well under 30% of your limits.
- Avoid opening new credit or making big purchases while you’re getting a mortgage.
Your credit score affects more than whether you qualify for a mortgage. It also shapes your interest rate and, on many loans, the cost of mortgage insurance. Even a modest improvement can lower your payment for years. Here’s how to get ready.
What goes into your score
| Factor | Approximate weight in a FICO score |
|---|---|
| Payment history | About 35% |
| Amounts owed (credit utilization) | About 30% |
| Length of credit history | About 15% |
| New credit | About 10% |
| Credit mix | About 10% |
Step 1: Check your reports
Get your reports from all three bureaus for free at AnnualCreditReport.com. Look for accounts you don’t recognize, late payments that aren’t yours and outdated balances.
Step 2: Dispute errors
File disputes online with the bureau that shows the error, and keep copies of what you send. Fixes can take a month or more, so start early.
Step 3: Pay every bill on time
Set up autopay for at least the minimum on every account. One recent late payment can outweigh months of progress.
Step 4: Lower your balances
Utilization is the share of your card limits you’re using. Paying balances down below 30%, and lower if you can, often helps quickly because it updates each month.
Step 5: Keep older accounts open
Closing an old card shortens your history and reduces your available credit. If it has no annual fee, keep it open and use it lightly.
Step 6: Pause new credit
Hold off on new cards, car loans or financing furniture until after closing. Lenders often recheck credit right before closing.
Daniel’s tip: Shopping for a mortgage won’t wreck your score. Credit scoring models generally treat several mortgage inquiries within a short window as a single inquiry, so compare lenders within a few weeks.
Typical minimum scores by loan type
| Loan type | Typical minimum |
|---|---|
| Conventional | Often around 620 |
| FHA with 3.5% down | 580 |
| FHA with 10% down | 500 to 579 |
| VA | No VA minimum, but many lenders look for about 620 |
These are general guidelines. Your lender sets its own requirements, and a higher score usually means better pricing.
See how your budget and down payment work together.
Frequently asked questions
How fast can I raise my score?
Lower balances can help within a billing cycle or two. Fixing errors and building payment history take longer.
Does checking my own credit hurt my score?
No. Checking your own credit is a soft inquiry and doesn’t affect your score.
Are there programs for buyers still building credit?
Yes. Some first-time buyer and down payment assistance programs are designed for moderate scores. Try the Down Payment Assistance Checker.
Filed under Buying a Home, Money & Mortgages
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