How To Improve Your Credit Score Before Applying For a Loan

If you are planning to buy a house or refinance it's a great idea to start working on improving your credit score several months before you apply for a loan. Boosting your credit score could help you qualify for a lower loan rate.

Paying your bills on time is a must and has a big impact on your credit score. In addition here are other strategies that can make a difference:

Don't open new credit cards. Don’t open or even apply for any credit cards within six months before applying for a loan. Lenders look at inquiries made within the past several months and may think that you've taken on new debt that hasn't yet been reported,

Don’t close any credit cards. Lenders are very interested in the ratio of your current balance to the available limit. If you close a card that had a high credit limit but keep your balance the same on your other cards, it will look as if you’re maxing out your available credit, which can hurt your score.

Check your credit reports for errors.  Checking your own credit score in advance prevents surprises when you apply for a mortgage. You can get free copies of your credit reports from each of the three credit bureaus every 12 months.

Start paying down your card balances. Paying down your cards is by far the best way to improve your scores quickly. Start early because the low balances don’t always appear on your credit report right away. 

Once you do start shopping for mortgage rates, try to limit that period to 30 days. Credit inquiries can affect your score if it looks to prospective lenders as if you’re about to take on a lot of debt. The FICO score recognizes all inquiries for a mortgage made within a limited time period and it will count as one inquiry.