How to Improve Your Credit Score Before Buying a Home

Everything You Need to Know

Securing a mortgage can be challenging if your credit score isn’t great. Here are some of the ways you can improve your credit score before buying a home, along with why bad credit mortgages are a great option if you want to purchase a property sooner rather than later.

Check Your Credit Report

First of all, figure out where you stand. The only way to know your credit score is to get a copy of your credit report. Everyone has the right to request one free copy of their credit report each year from each of the three major consumer reporting companies: Equifax, Experian and TransUnion. You should then review your report for any inaccuracies or outdated information that could be dragging your score down.

Pay Off Outstanding Debts

Outstanding debts can have a huge impact on your credit score. High credit card balances, in particular, can harm your score due to high credit utilisation rates. Aim to pay off as much of your debt as possible, starting with high-interest accounts.

Improve Your Payment History

Your payment history accounts for a large portion of your credit score. Lenders want to see that you can reliably make payments on time. It’s a good idea to use tools like calendar alerts to ensure you never miss a payment. Many banks and credit card companies also offer automatic payment options, which can help you stay on track.

Avoid New Credit Applications

Each new credit application can result in a hard inquiry on your credit report, which can temporarily lower your score. Avoid applying for new credit cards or loans in the months leading up to your mortgage application if you can.

Consider Credit-Building Products

If you have a limited credit history, consider using products designed to build credit, such as credit-builder loans or secured credit cards. These can help establish a positive credit history over time. No credit is just as bad as limited credit, so do try to start building a good credit history as far in advance of applying for your mortgage.

Explore Bad Credit Mortgages

If you don’t want to wait to buy a home and don’t have time to improve your credit score, bad credit mortgages can be a great option. These mortgages, also known as subprime mortgages, cater to borrowers with lower credit scores. While they typically come with higher interest rates and may require larger deposits, they provide an opportunity to purchase a home when traditional mortgages aren’t accessible.
To qualify for a bad credit mortgage, you’ll need to demonstrate your ability to make regular payments. Just as they do with a regular mortgage, lenders will look at your income, employment history, and overall financial stability. It’s advisable to work with a mortgage broker who specialises in bad credit mortgages to find the best deal.

What Next?

Improving your credit score before buying a home is always a good idea, no matter how much. Bad credit mortgages are a great choice for those who don’t want to wait around—and paying one off can improve your credit score as well. So why not look into it today?