Having a good credit score plays an integral role in helping buyers secure a competitive interest rate on your mortgage. And with the average rate for a 30 year fixed-rate mortgage hovering at 6.85 percent (up from 3.22 percent at the beginning of the year), getting a competitive rate on your mortgage is more important than ever.
Which means, as a first-time buyer, one of your main focuses should be boosting your credit.
But how, exactly, do you do that?
A recent article from realtor.com outlined tips to help first-time buyers boost their credit score—and score a better mortgage rate as a result—including:
- Pull your credit report and dispute any errors. Errors on your credit report can cause your score to plummet. But you can’t fix what you’re not aware of—so, if you’re planning to buy a home in the near future make sure to pull a copy of your credit report, review it for any mistakes, and dispute any errors directly with the reporting agencies.
- Set up automatic payments. Paying your bills on time (including credit cards and loans) is an absolute must for boosting your credit. If you’re having a hard time getting payments in on time, set up auto pay; that way, all of your payments are guaranteed to be processed on time each month.
- Increase your credit limits. Ideally, you would pay down your credit card debt before buying a home. But if that’s not feasible at the moment, you can still boost your credit score without paying down your balances. How? By increasing your credit limits. Contact your credit card companies and ask if they can increase your credit limits; increasing your limits improves your debt-to-credit ratio—which, in turn, can improve your credit score.