The Smart Way to Fix Your Credit Before Buying a House

07/02/2025

Buying a home is a major step that comes with long-term financial responsibility. Before a lender gives you the green light for a mortgage, they will take a hard look at your credit. This process doesn't start at pre-approval. It starts now.

If you are planning to buy a home, repairing your credit ahead of time can increase your chances of getting approved, save you money on interest, and lower your stress throughout the process. Here is a practical guide to fixing your credit the smart way so you can confidently move forward with your homeownership goals.

Why Credit Matters When You Apply for a Mortgage

Lenders review your credit history to decide how likely you are to repay a loan on time. Your credit score reflects your payment habits, outstanding debt, and overall financial behavior. Most conventional loans require a credit score of at least 620, but scores above 740 often qualify for better rates. According to Experian, a higher score can mean significant savings over the life of the loan.

A lower credit score may not stop you from buying a home, but it can affect your interest rate and monthly payments. It may also limit the type of loans available to you.

Step One: Pull and Review Your Credit Reports

Start by reviewing your credit reports from the three major credit bureaus: Equifax, TransUnion, and Experian. You can request a free copy from each bureau once per year at AnnualCreditReport.com

Go through each report carefully. Look for errors such as accounts you do not recognize, incorrect balances, or payment histories that do not match your records. Even one mistake can impact your score and delay your loan approval. If you find something inaccurate, submit a dispute right away. The Consumer Financial Protection Bureau provides a step-by-step guide to handling disputes effectively.

Step Two: Reduce High Balances on Credit Cards

Your credit utilization ratio is the amount of credit you are using compared to your credit limit. It makes up about 30 percent of your credit score. Keeping this ratio under 30 percent can help improve your score over time.

If your combined credit limit is $10,000, try to keep your balances below $3,000. Paying down credit cards quickly can give your score a noticeable boost. Focus on one card at a time or spread payments evenly, depending on your budget. Set reminders to pay more than the minimum and consider making multiple payments each month.

Step Three: Bring Past-Due Accounts Current

Late payments hurt your credit more than almost anything else. Payment history accounts for about 35 percent of your score. If you have any past-due accounts, make it a priority to bring them current.

Lenders want to see that you are managing your existing obligations well. Once you catch up, stay consistent with on-time payments. Setting up automatic payments or alerts can help you stay on track without having to think about due dates every month.

Step Four: Avoid Applying for New Credit Too Soon

Applying for new credit before you apply for a mortgage can lead to hard inquiries on your report. Each hard inquiry can lower your score slightly and raise questions about your financial situation.

Unless absolutely necessary, hold off on new credit cards, loans, or financing offers. If you need to take on a new obligation, be prepared to explain it during the mortgage review. Lenders will consider your debt-to-income ratio, and additional loans can impact your ability to qualify for the home you want.

Step Five: Keep Older Accounts Open

The length of your credit history contributes to your score. Even if you are no longer using a card, it is often better to leave the account open. This helps maintain your overall credit limit and demonstrates a longer history of responsible use.

If the card has no annual fee and is not causing issues, consider keeping it active by using it occasionally and paying it off in full. Closing old accounts can unintentionally lower your credit score by reducing the average age of your accounts and increasing your utilization ratio.

Extra Tips to Strengthen Your Credit Profile

  • Do not ignore medical collections. Unpaid medical debt can lower your score even if it was unexpected. Many newer credit scoring models weigh medical debt differently, but it is still better to resolve it.

  • Ask for a credit line increase if you are not carrying high balances. This can lower your utilization without taking on more debt. Only do this if you are confident you will not overspend.

  • Consider using a rent reporting service. Some services allow your on-time rent payments to be added to your credit history. This can help you build a positive payment record before you apply for a home loan.

  • Monitor your credit regularly. Apps like Credit Karma and Experian offer free tracking and alerts, so you can stay aware of any changes that could affect your score.

Why This Matters Now

Getting your credit in shape is not just about approval. It affects how much you pay each month, how much you qualify for, and how secure your loan terms will be. Waiting until you are ready to apply is often too late. The earlier you start, the more time you have to address issues without stress or surprises.

Let's Get You Mortgage Ready

Fixing your credit before buying a house takes planning, patience, and the right guidance. If you need help reviewing your credit, understanding your debt-to-income ratio, or preparing for mortgage approval, Royal Services Solutions LLC is here to help.

Book a free discovery session today and let's build a strategy that puts you on the path to homeownership with confidence.

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