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The Choosi Blog

5 Simple Ways to Improve Your Credit Score

When preparing to purchase a home, one of the essential items to tick off on your home-buying checklist is obtaining pre-approval. And as you may have guessed (or read), your credit score plays a crucial role in determining your chances of approval. A higher credit score not only increases your odds of getting approved, but it can also lead to a shorter approval timeline, lower interest rates, and more favorable loan terms, potentially saving you thousands of dollars over the life of your mortgage. If your credit score is not where you want it to be, don't worry! There are several ways to improve it before buying a home.

1) Check for errors: Take the time to thoroughly review each report for any inaccuracies, such as incorrect account information or fraudulent activity. If you spot any errors, make sure to dispute them with the respective credit reporting agency. Luckily, you're entitled to one free credit report per year from each of the three major credit reporting agencies: Equifax, Experian, and TransUnion.

2) Pay down high credit card balances: Your credit utilization ratio (the amount of credit you're using compared to your total available credit) is an important factor in determining your credit score. Paying down high credit card balances can improve your credit utilization ratio and boost your credit score. Aim to keep your credit utilization ratio below 30% for the best results.

3) Make all of your payments on time: Late payments can have a significant negative impact on your credit score. Make sure you're making all of your payments on time, including credit cards, loans, and bills. Consider setting up automatic payments or payment reminders to help you stay on track.

4) Avoid opening new credit accounts: While it may be tempting to open a new credit card or loan in the months leading up to your home purchase, doing so can actually harm your credit score. When you open a new credit account, it can temporarily lower your credit score and increase your credit utilization ratio. It's best to hold off on opening new accounts until after you've purchased your home.

5) Work with a credit counselor or financial advisor: If you're struggling to improve your credit score on your own, consider working with a credit counselor or financial advisor. They can provide personalized guidance and help you develop a plan to improve your credit score and prepare for homeownership.

Once your credit score is in order, follow these tips to get in the best financial shape prior to going through the home-buying process!

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