Tips to Improve Your Credit Score for Homebuying
Banks use several factors to determine how to approve someone for a mortgage loan, including your credit score and debt-to-income ratio. Here are some tips that can help you improve your credit score.
Get to Know Your Credit Score
While there are many factors that mortgage lenders consider, your credit score is one of the most important. Your credit score is made up of multiple data points from your credit history, including how long you’ve had credit, the timeliness of your payments, the types of credit you’ve had, the percentage of your credit you’re using, and any new credit you’re applying for.
In short, your credit score represents your creditworthiness, or the likelihood that you’ll repay a loan on time.
Tips to Improve Your Credit Score
If your credit score isn’t quite where you want it to be, there are many ways to help improve it:
- Make payments on time.
Setting up automatic payments for the minimum amount due can help your accounts remain in good standing. - Catch up on overdue payments.
If you have any bills that are past due, prioritize those first. - Pay down revolving balances.
Once you’re current on all your bills, use any extra cash to keep paying down your balances. - Correct any errors on your credit report.
If you find inaccurate personal information on your credit report, visit the credit bureau’s website to see how to file a dispute. - Use the Key Secured Credit Card® to help build credit.1
Our no-annual-fee2 card reports to the major credit bureaus, so it’s a smart way to help build or establish credit. - Keep existing credit lines open.
Even if your spending doesn’t change, keep the line of credit, like a credit card, open. It can show a decrease in your credit utilization ratio to help improve your score. - Limit new applications for credit.
Weigh the impact to your credit score when you’re deciding whether to do anything that will result in a hard pull on your credit, like buying a new car or applying for a new credit card.
It can take up to six months to see noticeable results.
Pay Off Your Debt to Increase Credit Score
Paying off debt could improve the likelihood of being approved for a mortgage loan in two ways: It lowers your debt-to-income ratio, an important factor that lenders consider, and it may help improve your credit score.
If you have a high amount of debt relative to your income, it can make getting approved for a mortgage more challenging. Lenders use debt‑to‑income ratios to assess the borrower's ability to manage a monthly mortgage payment in addition to existing debt. Generally, lower ratios are viewed more favorably, though acceptable limits can vary depending on the lender and the specific loan program, and are considered alongside other factors such as credit history and income stability.
Even if you meet the criteria for a mortgage, it’s still important to think carefully about the amount of debt you’d be taking on. It’s generally recommended that your mortgage payment takes up no more than 30% of your total income. There are some exceptions, and a mortgage loan officer will be able to offer helpful advice specific to your situation.
If you have questions, we have answers.
The home-buying process can seem a little daunting and even intimidating. Don’t worry — we’re here to help you every step of the way. We’ll take you through the entire process, answer all your questions, and always keep you prepared for what’s next. When it comes to getting you into your new home, we're committed to helping you reach your goals.