Credit Tips: Simple Ways to Raise Your Score and Save on a Mortgage
When you’re hunting for a home, your credit score is the first thing lenders look at. A higher score can shave thousands off your mortgage rate, which means lower monthly payments and less interest over the life of the loan. The good news? You don’t need a finance degree to improve it. Below are easy actions you can start right now.
Why Your Credit Score Matters for Home Buying
Think of your credit score as a shortcut that tells banks how risky you are as a borrower. A score above 740 typically lands you the best rates, while a score in the 600s can push your rate up by a full percentage point or more. That extra percent adds up fast – on a £200,000 loan, it’s roughly £150 a month more. Lenders also use your score to set the size of the loan you qualify for, so a better score can mean a bigger buying power.
Besides the rate, some loan programs require a minimum score. For example, many first‑time‑buyer grants in North Carolina start at 620, and zero‑down mortgages often need at least 660. Knowing these thresholds helps you target the right improvement goals.
Quick Actions to Improve Your Credit
1. Pay down revolving balances. Credit cards are the biggest factor in your utilization ratio – the amount of credit you’re using compared to your limit. Aim to keep it under 30%, and under 10% if you want a noticeable bump. If you have a £5,000 limit and a £2,000 balance, paying £1,000 off drops utilization from 40% to 20% instantly.
2. Fix any errors on your report. Grab a free copy of your credit report from the major bureaus and scan for mistakes – wrong balances, accounts that aren’t yours, or outdated late payments. Dispute errors online; the process usually takes 30 days and can clean up points fast.
3. Set up automatic payments. Late payments hurt the most. Automating at least the minimum amount guarantees you never miss a due date. If you can, pay the full balance each month to avoid interest and keep utilization low.
4. Keep old accounts open. Length of credit history accounts for about 15% of your score. Closing a decade‑old card can shave years off your average age and drop your score, even if you’re not using it.
5. Add a mix of credit types. If you only have credit cards, a small personal loan or a secured credit card can improve the “credit mix” factor. Just be sure the new debt fits your budget – a loan you can’t manage will backfire.
These steps don’t require big money, just a bit of discipline. Most people see a 20‑point lift within a few months, and larger gains appear after six months of consistent habits.
While you work on your score, consider a mortgage pre‑approval. Lenders will run a soft pull that doesn’t affect your score, but it gives you a realistic budget and shows sellers you’re serious. It also highlights any last‑minute issues you can fix before the full application.
In short, a higher credit score means a cheaper mortgage, a larger loan amount, and more options when you find the right home. Use the quick actions above, monitor your progress, and you’ll be on the fast track to better credit – and better home‑buying power.