Are you putting home shopping on pause because your credit score is stopping you from closing the deal? You're not alone. The good news is that your credit score isn't set in stone. And with a few strategic moves, you can boost your score and secure more favorable mortgage rates.

From identifying common report errors to simple strategies for paying down existing debt, here’s how to improve your credit score for a mortgage loan.

Why Your Credit Score Matters

Unless you are a fortunate buyer who can pay in cash for a home, you'll need to secure a mortgage to finance the purchase. And to do that, you must show mortgage lenders you are creditworthy.

Mortgage lenders want to know:

• How much debt you have
• Whether you've paid bills on time
• If you've had any significant financial issues in the past, such as bankruptcies or foreclosures

Your credit score, which typically ranges from 300 to 850, is a numerical measure of your financial health. While some lenders will work with lower credit scores, most prefer a minimum credit score of 620.

How to Improve Your Credit Score

Identify and Dispute Errors

According to a recent USA Today article, nearly half of all credit reports contain errors, meaning potentially millions of Americans are being unfairly penalized with lower credit scores. To determine if your credit report is accurate:

• Pull a free copy of it from a major credit bureau online
• If you spot incorrect personal information, accounts you do not recognize, or on-time payments marked as late, write a dispute letter to the credit bureau
• Each error should noted in a separate letter

It’s important to note that credit bureaus typically take 30 days to investigate claims.

Pay Down Existing Debt

Getting rid of debt won’t just reduce stress; it’ll give your credit score a nice boost. By consistently paying off debt, you build a solid payment history. This history shows lenders you're reliable. To tackle debt and improve your credit score for a mortgage loan:

• Make all payments on time, every time
• Focus on paying off credit cards with the highest interest rates first
• Consider paying off your smallest debts first; these quick wins can motivate you to tackle larger debts
• Whenever possible, make more than your monthly minimum payments

Keep Old Accounts Open

It may be tempting to close out old accounts once you pay off debts, but keeping them open can benefit your credit score. How?

• Older accounts showcase your credit history, which makes up about 15% of your score
• Open accounts without a balance increase your total available credit, making you more attractive to lenders
• Keeping accounts open gives you the financial flexibility you might need without having to open a new line of credit (lenders prefer to see stable lines of credit)

Limit Hard Inquiries

There are two ways to check a credit score—a soft and hard pull.

A soft pull is typically used for background checks or pre-approval offers. These can be done frequently without impacting your credit score.

A hard pull requires your permission and happens when mortgage lenders check your credit score. While a hard pull only temporarily lowers your credit score by a few points, it can have a more significant impact if there are multiple hard inquiries in a short period of time.

To protect your credit score, limit the number of credit applications you submit and try to complete all of them within a 14-45-day window; most scoring models consider these to be single inquiries.

Mortgage Options for Lower Credit Scores

While improving your credit score is always beneficial, don't let a score below 620 discourage you from exploring your mortgage options. JustChoice offers several programs designed for borrowers with lower credit scores.

• FHA Loans: Borrowers with a credit score of 580 and up may qualify for a loan with only 3.5% down. Those with scores between 500-579 may still qualify with 10% down.
• VA Loans: Do you have a record of military service but are worried about the state of your credit? VA loans are a popular zero-down payment option that does not have an official minimum credit score requirement.
• USDA Loans: We commonly refer to these loans as the federal government’s “worst-kept secret”—not only because they come with zero down-payment options but also because they only require a 620 minimum credit score.

JustChoice Lending: Your Mortgage Solution

Looking for a lender who works with clients of all income levels, credit histories, and needs? You're in the right place. JustChoice Lending (JCL) is a socially responsible mortgage lender focused on your needs. Whether you're a first-time buyer, a veteran, or need down payment assistance, our team is here to help. Contact us today!