Buying a Home? Boost your FICO score first
Boosting a FICO score is easier said than done. Improve your FICO before you start your home search, by following these steps.
Put all your bills on autopay
Your payment history makes up 35% of your FICO score. Missing a payment or letting a bill go to collection can have an impact on your score.
Prevent this by putting your bills on autopay or set up payment reminders at least a few days before each bill is due.
Pay Down some debts
Your credit utilization rate, or the amount of your credit line you're currently using, accounts for another 30% of your score. Meaning, the more of your credit line you spend, the lower your score will presumably go.
Work on paying down your debts to lower your high utilization rate.
Avoid New Debt
If a mortgage loan is on your radar, then avoid applying for new credit cards, loans or other debts. These not only result in hard credit inquiries, but they'll increase your debt-to-income ratio, making it harder to qualify for a mortgage.
Another tip, in the event you're able to pay an account off in the months leading up to your home purchase, don't close it out. The length of your credit history makes up 15% of your FICO score.
Look at your Credit Mix
Credit mix makes up 10% of your credit score and refers to having both installment loans and revolving credit.
Revolving credit refers to credit with no set payoff date, like a credit card. Having a diverse credit mix shows lenders that you can handle a variety of credit types.
If you only have installment loans on your credit report, you can improve your credit mix by opening a credit card. However, you shouldn't take out a loan just to diversify your credit mix.
Check your Credit and Monitor your Progress
While you're working your way toward the credit score needed to buy a house, check your progress with a free score; some credit cards and many personal finance websites offer them.
Free credit scores often are VantageScores, a competitor to FICO. Either type of score can be used to track your progress — they both emphasize the same factors, with slight differences in weighting, so they tend to move in tandem.