Credit scores are a major determining factor when applying for a loan. The purpose of credit scores is to let a lender know if you are likely to be able to make payments on time for at least two years. A higher score indicates that a borrower is less likely to be late on a payment, and vice versa. Credit scores are determined by an algorithm that analyzes credit reports from Experian, TransUnion or Equifax. So, how does someone improve their credit score? Read below for some tips.

Pay your bills on time

A major factor to your credit score is your debt-to-income ratio. Paying off any debt can have a major, positive impact on your credit score.

Catch up on past due bills

A late payment can remain on your credit score for up to seven years. Keeping up with payments on all your accounts can be good for your score. Additionally, making timely payments, stops any other dings being added to your credit history; it also prevents fees that accumulate from making late payments.  

Open credit accounts that report to major credit bureaus.

Having several open and active credit accounts can be helpful. Just make sure to use these cards responsibly and not collect debt. You also should limit how often you apply for new accounts. Each application leads to a look into your credit score, which can hurt your score a little bit.

Do not add any more debt

Do not add any more debt while you are looking to purchase a home. The loan pre-approval process for your new home is based off your debt-to-income ratio; meaning, adding debt can possibly cause you to not qualify for a home loan.

Contact creditors

If you are a loyal customer who always pays your bill on time, but accidently forgot to pay one time, you can contact creditors asking to disregard the transgression on your credit score.

Dispute errors on your credit report

You can dispute errors that you find on your credit report, which can increase your credit score.

Do you need help with your credit before buying a new home? No worries, we have participating lenders that would be more than willing to help you make the dream of homeownership a reality. Click here to learn more about our participating lenders.