When you apply for a mortgage, your credit score isn’t just a number—it’s the key that unlocks lower interest rates. A difference of even 50 points could save you tens of thousands of dollars over the life of your loan. Here is how to manage yours effectively:
1. The 30% Rule (Utilization)
Your credit utilization is the amount of credit you use compared to your limits. To keep your score high, aim to keep your balances below 30% of your available limit. If you have a $10,000 limit, try not to carry a balance higher than $3,000.
2. Guard Your “Credit Age”
Thinking about closing that old credit card you never use? Think twice. The length of your credit history accounts for about 15% of your score. Keeping older accounts open (even with a zero balance) helps prove your long-term reliability to lenders.
3. Avoid New “Hard Hits”
Every time you apply for a new credit card or auto loan, a “hard inquiry” is recorded, which can temporarily dip your score. If you are planning to buy a home in the next 6 months, avoid opening new lines of credit or making large financed purchases (like a new car).
4. Rent Reporting
Did you know you can now get credit for paying your rent on time? New platforms allow tenants to report their rent payments to credit bureaus. This is a game-changer for first-time buyers with a “thin” credit file.
Ready to see where you stand? At Lending with Lima, we don’t just look at the numbers; we help you understand them. If you’re worried about your score, let’s chat about a plan to get you “mortgage-ready.”