How to whip your credit into shape before you apply for a mortgage

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apply for a mortgageOne of the biggest purchases you will ever make is likely to be your home. A home purchase is usually so large that you need to borrow money to complete it. Your mortgage is a large amount to borrow, no matter the price of your home. As a result, one of the best things you can do if you want to save money over time is to get the lowest possible mortgage rate.

The most important factors considered by mortgage lenders when determining your rate is your credit score. “The higher your credit score, the lower the rate you’ll get for your mortgage,” says Beverly Harzog, the author of The Debt Escape Plan.

She points out that lenders will also look at items like your debt-to-income ratio, employment history, and down payment when approving you for a loan and setting your interest rate, but a good credit score is the item that carries the most weight in determining your interest charges. “Over the course of the loan, a lower rate can save you a ton of money,” Harzog continues.

How to improve your credit score before applying for a mortgage

The time to work on your credit score is before you apply for your mortgage. The first step is to check your credit report. You are entitled to a free credit report from each of the major bureaus every year by visiting, and of course you can also obtain a copy of your credit report and view your credit score by signing up for a free service like Quizzle.

Look through your information to determine if there are inaccuracies in your report dragging you down. Those need to be corrected if you want to see your credit score improved. Quizzle offers insightful information about your financial situation so that you can identify potential problem areas to target.

Your payment history is the biggest factor influencing your credit score, so make sure you continue to make your payments on time. “If you’re not already on a budget and tracking your spending, you need to set this up right now,” Harzog insists. “This will help ensure that you pay all your bills on time.”

You can’t make up for past late and missed payments, though, so one way to help get your credit score in good shape is to pay down some of your credit card debt.

Harzog explains that credit utilization is the second-most important factor in determining your credit score, and one of the easiest difficulties to overcome, if you have the means to pay down some of your credit card debt. “The golden rule is to keep your credit utilization ratio below 30%,” she says. “But if you want to boost your score as much as possible, keep it below 10%.”

Between paying your bills on time and paying down credit card debt, you should be well on your way toward boosting your credit score to a point where you qualify for a better mortgage rate.

How long does it take to see improvement in your credit score?

The chances are that you won’t see an immediate improvement in your credit score. Your credit score is based on information that is reported to the major credit bureaus, so it depends on when your creditors report their information. Many credit card issuers report your balance (and your current credit limit) to the bureaus every 30 or 60 days. This is another reason that reducing your credit card debt can help you boost your score relatively quickly. However, there is no guarantee that your information will be reported as quickly as you like, so you might need to wait 90 days or more to see improvement.

Harzog also points out that previous black marks on your credit history can slow down your ability to get your credit score in good shape. “For someone who has a bankruptcy in their recent past, it will take longer to see improvement,” she says. “If you don’t have negative items on your credit report, you just need to wait until you can get your utilization ratio as low as possible and the issuers report it.”

Even though it might be tempting to apply for a mortgage first, and then worry about the credit score later, Harzog says it’s better to wait. You won’t be offered a good deal if your credit score is only fair. Even saving 1% on your mortgage can mean a savings of tens of thousands of dollars over the course of a 30-year loan. Waiting a few months to get your score into the higher range of good, or getting it up to excellent, can be a smart money move.

“Unless you have a reason to get a mortgage as soon as possible, it’s best to wait until you can maximize your score,” Harzog says. “It truly does make a huge difference in your monthly payments and this will help you in the financial long run.”

Visit to check your credit or check mortgage options that may be available to you.

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Miranda is a freelance writer and professional blogger specializing in financial topics. Her work has appeared in numerous media, online and offline. Her blog is Planting Money Seeds.