The Financial Game Worth Playing to Win Right Now

Improving your credit score before buying or refinancing a home is one of the smartest financial moves you can make in the current environment. A stronger score opens the door to better mortgage rates, lower monthly payments, and thousands of dollars in savings over the life of your loan. The difference between a 680 score and a 740 score on a $400,000 mortgage can be measured in tens of thousands of dollars in total interest paid over thirty years. That is a return on the time and effort required that almost nothing else in personal finance can match.

Here are the steps that make the biggest difference.

Keep Credit Card Balances Low

Your credit utilization ratio is one of the most heavily weighted factors in your credit score calculation. Utilization measures how much of your available revolving credit you are currently using across all accounts combined. Keeping balances below 30 percent of your total available limit helps your score meaningfully. Getting below 10 percent is even better and can produce a significant improvement relatively quickly once the lower balances report to the bureaus.

One timing strategy worth knowing is that paying your balance down before your statement closing date rather than before the due date can accelerate the score improvement. The balance that reports to the credit bureaus is the balance on your statement date and a lower balance on that date produces a lower utilization ratio in the next scoring cycle.

Make Every Payment on Time Without Exception

Payment history accounts for approximately 35 percent of your credit score which makes it the single most heavily weighted factor in the calculation. One missed payment can produce a score drop that takes months to recover from regardless of how strong the rest of your credit profile looks.

Set up automatic minimum payments on every account so that a busy month or a simple oversight never results in a late payment appearing on your report. You can always pay more than the minimum manually but the automatic payment ensures the account never goes past due under any circumstances.

Keep Your Older Accounts Open

The length of your credit history is a meaningful factor in your score and it is one that most people undermine without realizing it by closing accounts they are no longer actively using. An old credit card sitting at a zero balance is doing two things simultaneously. It is contributing positively to your average account age and it is keeping your total available credit higher which keeps your utilization ratio lower.

Unless an account carries an annual fee that is not justified by any benefit it provides leave it open. The passive benefit it is providing to your score every month costs you nothing.

Check Your Credit Report for Errors and Dispute What Is Wrong

Errors on credit reports are more common than most people expect and they can be suppressing your score without you knowing it. Incorrect late payments that you actually made on time. Balances that are reported higher than the actual amount. Accounts that belong to someone else with a similar name. Any of those errors can be disputed with the reporting bureau and removed if the investigation supports the dispute.

As Brittney Fleischman explains clearing up errors is one of the most efficient ways to improve a credit score because it requires no behavior change and no time to allow payment history to accumulate. It simply corrects inaccurate information that was pulling the number down.

Avoid Opening New Credit Accounts Before Buying or Refinancing

Every new credit application generates a hard inquiry on your report that can reduce your score by a few points. New accounts also reduce your average account age which affects the length of credit history component of your score. Both effects are temporary but during the period when you are actively trying to maximize your score before a mortgage application even small reductions matter.

From the time you get serious about buying or refinancing until after closing hold everything steady. No new credit cards. No auto loan applications. No store financing. The discipline required for this period is short and the benefit of arriving at the mortgage application with a fully optimized profile is real.

The Best Move Is Working With a Lender Who Reviews Your Credit With You

Every borrower's credit profile is different and the factors most suppressing one person's score may be completely different from what is holding back another person's number. A lender who pulls your credit and reviews it with you specifically can identify the two or three actions that will produce the most score improvement in the shortest time for your particular situation rather than offering general advice that may not address what is actually limiting your number.

Brittney Fleischman offers a free credit review that covers your current score, what is affecting it, and a custom plan for getting you loan ready as efficiently as possible. Text, call, or message Brittney Fleischman to get that review started and follow along for more tips that help you make smart moves with your money.

Sources

ConsumerFinancialProtectionBureau.gov
MyFICO.com
Investopedia.com
AnnualCreditReport.com
MortgageNewsDaily.com