Credit Score Reality Check
Your credit score can literally cost you (or save you) tens of thousands of dollars over the life of your mortgage. The difference between a 680 and a 760 score might mean half a percent in rate, which on a $500,000 loan is roughly $140/month. That adds up.
What Actually Moves the Needle
First, understand what matters: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%). For mortgage purposes, focus on the first two.
Pay everything on time. Set up autopay if you're forgetful. One missed payment can drop your score 100 points and stays on your report for seven years. Not worth it.
The Utilization Trick
Credit card utilization—the percentage of available credit you're using—matters more than most people realize. Keep it under 30% on each card and ideally under 10% overall. If you have a $5,000 limit, keep your balance below $1,500.
Here's a hack: pay your credit card balance down before the statement closing date, not just before the due date. The balance that reports to credit bureaus is typically what's on your statement, so timing this payment correctly can improve your utilization immediately.
What NOT to Do
Don't close old credit cards. Even if you don't use them, they add to your total available credit and length of credit history. Closing them can hurt your score.
Don't open new accounts right before applying for a mortgage. Each application is a hard inquiry that dings your score, plus new accounts lower your average age of credit. Wait until after you close on your house to open that new store card.
Don't let anyone run your credit unless you're seriously applying for something. Shopping around for mortgage rates is fine—multiple inquiries in a short period count as one. But random applications for different types of credit add up.
Dealing with Collections or Errors
If you have collections on your report, don't ignore them. Contact the creditor or collection agency and negotiate a "pay for delete" if possible. Some will remove the collection from your report if you pay it off. Get any agreement in writing.
Also, actually pull your full credit reports from all three bureaus (Experian, Equifax, TransUnion) and review them carefully. Errors are common. If you find something wrong, dispute it through the credit bureau's website. This takes time, so do it months before you plan to apply for a mortgage.
Timeline Expectations
Improving credit takes time. If you start today, you might see 20-30 point improvements within 2-3 months from better utilization and consistent on-time payments. Bigger improvements—like recovering from past late payments or collections—can take 6-12 months.
If you're serious about buying in the next year, start working on your credit now. Future you will be very grateful.
Want to know where you stand? We can pull your credit and give you specific guidance on what would help most in your situation.
