When buying a home, your credit score is an important factor on how much money you can borrow. A low credit score may limit the type of home you buy. As a result, you may need some time to improve your credit score, so start planning now.

How to Fix Your Credit Score

First step is to get a copy of your credit report. Every consumer in the United States is entitled to see their credit report free once a year. You can contact Equifax, TransUnion and Experian for copies of your credit report.

  • Review your credit report and check for any errors or outdated information. If you find any mistakes, you must inform the reporting agency and the organization that provided the information in writing as soon as possible.
  • Ensure that you make all payments on time. Even if you are paying the minimum payment on your credit card, do it by the due date. Set up payment reminders on your calendar. Some companies allow you to set up automatic payments, that means the money is withdrawn from your bank account every month.
  • Reduce your debt to income ratio. To calculate your debt to income ratio, add up all your monthly debt payments and divide them by your gross monthly income. Lenders will be looking for a ratio under 40%. This is one-way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.
  • Raise your available credit. You can request a higher line of credit from an established creditor, like your credit card company. Increasing your credit limit can give you more flexibility and help your credit scores by lowering your credit utilization ratio. (Hint: That means don’t use the additional credit).
  • If possible, pay down your bills every two weeks instead of once a month. Most importantly, this will also reduce you credit utilization ratio.
  • Have a mix of unsecured and secured debt. Unsecured debt includes student loans, credit cards and medical bills. Conversely, secured debt includes things like car loans, where the loan is secured by collateral. Your mortgage is secured debt.
  • Don’t close old accounts. The age of your credit history is a factor in your credit score. The older the better.

Your Credit Score is Important

Your credit score is a huge factor in your financial life. It impacts your ability to get a mortgage or car loan. Your credit score can even impact your home and auto insurance rates. In conclusion, work on improving your credit score today so you do not have to worry about it in the future.