How to Increase Your Credit Score Quickly and Buy Your First House

As mortgage rates continue to drop, more people are finding that now is a great time to consider buying a house. But before you start house hunting, one critical factor could either open doors or hold you back: your credit score. A higher credit score can unlock better loan terms, lower interest rates, and increase your chances of getting approved for a mortgage. In this Redfin article, we’ll guide you through practical steps to boost your credit score, whether you’re buying a house in Portland or a property in San Diego. These tips will help you take advantage of the favorable mortgage environment and get closer to your dream home.

1. Check your current credit score

Impact on score: N/A

Speed of impact: N/A

While this may not be your idea of an enjoyable weekend or afternoon activity, start by getting a copy of your credit report and looking for any mistakes. 

First, find out your credit score by getting a credit report. There are sites where you can get a free credit report like AnnualCreditReport.com. They provide credit reports from the three credit bureaus Equifax, Experian, and TransUnion at no charge to you. 

2. Dispute any errors you find

Impact on score: Varies

Speed of impact: Varies

You will then need to look through those reports, inspecting them for mistakes. Errors could include an incorrect name or address, credit lines that don’t belong to you, duplicate entries, and incorrect account status. Incorrect information on your credit reports could be dragging down your scores. 

If you find a mistake, you’ll also need to bring it up with each bureau. Each one has a slightly different process for disputing errors, but you should be able to easily find instructions on their websites. Alternatively, you could enlist a credit repair service to help get those errors fixed so you can raise your credit score quickly.

Pro Tip: Correcting errors on your credit reports are not only important to your credit profile but it is also your legal right as a consumer to have any accounts on your credit report, reported accurately. – Classy Credit Repair Services

3. Sign up for credit monitoring services

Impact on score: N/A

Speed of impact: N/A

Track all of your hard work by signing up for regular credit monitoring. Regular monitoring will help you understand how different activities—like paying off debt or opening a new credit account—impact your score, empowering you to make informed decisions that can enhance your credit over time.

By keeping a close eye on your credit score, you can quickly identify any changes or potential errors that might affect your creditworthiness. It allows you to detect signs of identity theft early, as unexpected changes in your score can signal fraudulent activity. 

4. Lower your credit utilization ratio

Impact on score: High

Speed of impact: Fast

Improving your credit utilization ratio is one of the fastest and most effective ways to boost your credit score. Credit utilization is a significant factor in calculating your credit score, typically accounting for about 30% of your total score. This makes it one of the most important aspects of your credit health, second only to your payment history.

You might be wondering, just what is a credit utilization ratio? A credit utilization ratio is how much you currently owe divided by your credit limit. An ideal credit utilization ratio is generally considered to be below 30%. This means you should aim to use no more than 30% of your available credit at any given time. For example, if you have a total credit limit of $10,000 across all your credit cards, you should try to keep your total balance under $3,000.A lower ratio indicates that you’re using less of your available credit, which can make you appear less risky to lenders.  Here are a few ways to lower your credit utilization ratio: 

Pay down your balances

One of the most straightforward ways to improve your credit utilization ratio is by paying down your credit card balances. The less debt you carry on your credit cards, the lower your utilization ratio will be. This method is especially effective if you can pay off large chunks of your balance, or even better, pay it off entirely each month.

Request credit limit increase

Another effective strategy is to ask your credit card issuer for a credit limit increase. If you can increase your credit limit while keeping your spending the same, your utilization ratio will decrease. Just be careful not to increase your spending after getting the limit boost, or you’ll be right back where you started.

Make multiple monthly payments on credit cards

Making multiple payments each month can also help keep your credit utilization ratio low. Instead of waiting for your statement due date, consider paying down your balance as you go. This way, your balance never gets too high, and your credit utilization remains in check.

If you’re carrying balances across several credit cards, consolidating your debt might be a good option. By moving all your balances to a single card with a higher limit or to a personal loan, you can simplify your payments and lower your overall utilization ratio. Plus, it can make managing your debt less stressful.

Get alerts when you go over your desired utilization ratio

Finally, sign up for alerts on your credit cards to keep an eye on your credit utilization. Many credit card issuers offer alerts when you’re getting close to a high utilization level. These reminders can help you stay on track and make sure your credit utilization doesn’t sneak up on you.

5. Pay on time: Every bill, every time

Impact on score: High

Speed of impact: Slow

No strategy to bump up your score will work if you end up paying your bills late. Why is this? Your payment history makes up 35% of your credit score ― the most heavily weighted factor. So not making payments on time is the single worst thing you could do. Reminder – you’ll want to pay all bills on time. Not just credit card bills, but also your student loans, rent, utilities, phone bills, and so on. 

Pro Tip: Sometimes when payments are late, the creditor will automatically raise the interest rate being charged and this creates a greater problem than just being late. A simple solution to avoid being late on payments is to set up “auto pay” plans and to consider using a budgeting application such as Mint, or Everydollar. – Graves Financial Wealth Management 

6. Report your on-time rent and utility payments

Impact on score: Depends. Generally medium. For those with limited credit history, high.

Speed of impact: Fast

One powerful yet often overlooked way to boost your credit score involves reporting on-time rent and utility payments to the credit bureaus. While these payments don’t automatically get reported to the major credit bureaus, you can use third-party services like Experian Boost and UltraFICO that will report your consistent payments for you. 

By doing this, your rent and utility payments can be included in your credit report, potentially giving your credit score a significant boost, especially if you don’t have a lot of other types of credit. This can be particularly beneficial for individuals with limited credit history, as it adds positive payment information that can help build a stronger credit profile. It’s important to keep in mind that these products may not be visible on all 3 credit reports or in all circumstances.

When rent and utility payments are reported, they demonstrate your ability to manage regular, recurring payments responsibly, which is a key indicator of creditworthiness. Over time, consistently reported on-time payments can help offset any negative marks on your credit report and contribute to a higher overall credit score.

7. Do not open or close new accounts or lines of credit 

Impact on score: High

Speed of impact: Fast

Every time you apply for a line of credit, the lender will pull your credit report as part of the application process. This is called a hard inquiry and in the short term, it can hurt your credit score. A hard inquiry is placed on your credit report even if you’re not approved and even if you eventually decide to not accept the credit card. 

On the other hand, closing an account immediately reduces your available credit. If you have outstanding debt, this will cause your credit utilization ratio to jump up and therefore, your credit score to drop.

Pro tip: Closing a credit card account with a high credit limit could have an especially negative impact on your score, particularly if you are carrying a high balance on another card. – AZ Credit Medix

8. Become an authorized user

Impact on score: High (especially for those with limited credit history)

Speed of impact: Fast

You can also boost your credit score fast by piggyback on someone else’s. If you have a relative or a close friend with an excellent credit history, consider asking them to add you as an authorized user on one of their accounts. The cardholder doesn’t have to let you use the card – or even give you the account number – but you will still benefit.

Remember, while authorized users do build credit, that credit can be good or bad. It is dependent upon how the primary account holder manages balances and bill payments. So you only want to become an authorized user on an account owned by someone responsible and that you trust.

Pro Tip: Before requesting or adding someone as an authorized user, make sure to follow these three criteria: 1) Card was issued a minimum of 2+ years 2) Balance is below 30% of available credit 3) 100% payment history. – Pyramid Credit Repair

9. Consider adding to your credit mix

Impact on score: High (especially for those with limited credit history)

Speed of impact: Fast

This method is only to be used with caution in very specific situations. It only applies to borrowers with limited credit history or those who have very few lines of credit open.

The idea is to increase your credit limit and/or show that you are a reliable borrower of different types of credit lines. 

If you do not have a credit card in your name, this is especially helpful. Just be sure that you pay on time, every time, and try your best not to carry a balance each month. Do not use more than 30% of the available credit limit. If you do have a credit card, taking on a different type of credit like a personal loan and repaying it on-time can also improve your score.

For those with limited credit history, taking on a personal loan or opening a credit card are two highly impactful ways to improve your score and demonstrate your credit worthiness.

How long does it take to improve a credit score?

After reading through these tips you are likely wondering – “how long exactly is it going to take to improve my credit score?” Unfortunately, there’s no way to predict the exact timing for when your credit score will go up or by how much. So while you wait, remember to be patient, implement the above tips, and continue checking your credit score to see how it reacts. By following these steps you should be well on your way to improving your score and purchasing your first home.