When applying for a mortgage, your credit score is one of the most important factors lenders consider. A higher score can secure better interest rates, reduce down payment requirements, and increase your overall loan approval chances. At SmartKey Lending, we understand that preparing your credit can feel overwhelming, especially if you’re unsure where to begin. This guide will walk you through how to improve your credit score effectively before applying for a mortgage.
Why Your Credit Score Matters in Mortgage Approval
Mortgage lenders use your credit score to evaluate your risk as a borrower. Scores typically range from 300 to 850, and most lenders prefer applicants to have a score of at least 620. However, a score of 740 or higher may qualify you for the most competitive rates and flexible loan terms.
Here’s how your score influences your mortgage:
Loan Approval: A low credit score can lead to rejection or require a co-signer.
Interest Rates: Higher credit scores can save thousands of dollars over the life of your loan.
Loan Type Eligibility: Some government-backed loans (like FHA, VA, USDA) have different credit requirements.
Down Payment Requirements: A better score may lower your required down payment.
That’s why it’s crucial to optimize your credit profile before submitting a mortgage application.
Check Your Credit Reports for Errors
Start by requesting your credit report from somee major credit bureaus—Equifax, Experian, and TransUnion.
What to look for:
Incorrect account balances
Duplicate or fraudulent accounts
Late payments that were actually paid on time
Incorrect personal information (name, address, Social Security number)
What to do if you find errors:
File disputes with the appropriate credit bureau
Provide documentation to support your claim
The bureau is required to investigate and respond within 30 days
Correcting inaccurate information can boost your score quickly and significantly.
Pay All Bills On Time
Payment history makes up about 35% of your FICO credit score. Late or missed payments negatively affect your score more than any other factor.
Tips to stay on track:
Set up automatic payments or calendar reminders
Contact creditors if you’re facing hardship—they may offer extensions or reduced payments
Pay at least the minimum, even if you can’t pay in full
Lenders want to see a track record of consistent and timely payments over at least 12 months before you apply for a mortgage.
Reduce Credit Card Balances
Your credit utilization ratio—the amount of revolving credit you’re using compared to your credit limit—should ideally be below 30%.
Example: If you have a $10,000 total credit limit, try to keep your balance under $3,000 across all cards.
How to lower utilization:
Pay down balances aggressively, starting with cards closest to their limit
Ask for a credit limit increase (but don’t increase spending)
Avoid new large purchases before mortgage application
This one action alone can significantly boost your score in a short time.
Avoid Opening or Closing Credit Accounts
When preparing for a mortgage:
Don’t open new credit accounts — Each inquiry creates a temporary dip in your score.
Don’t close old credit cards — Even unused cards help maintain your credit history length and available credit.
Instead, keep older accounts open, especially if they’re in good standing, and avoid taking on new debt unless absolutely necessary.
Pay Off Collections and Charge-Offs
If your credit report includes unpaid collections or charge-offs, it’s important to address them before applying for a mortgage.
Options include:
Paying in full
Settling the debt for less than owed
Requesting “pay-for-delete” agreements (some creditors will remove the entry upon payment)
Clearing these accounts shows lenders that you’ve taken responsibility and reduces your risk profile.
Don’t Co-Sign for Others
Co-signing a loan means you’re equally responsible for the debt—even if someone else is making the payments. If they miss a payment or default, your credit takes the hit.
During the mortgage prep phase, avoid co-signing, as it can affect your debt-to-income ratio and potentially derail your mortgage application.
Build Credit If You Have None
For new borrowers or those with limited credit history, start building credit now:
Open a secured credit card (backed by a cash deposit)
Use a credit-builder loan from a local bank or credit union
Get added as an authorized user on a trusted family member’s account
The longer your credit history, the better your score will be over time.
Monitor Your Credit Monthly
Stay in control of your credit journey with regular monitoring. Many services offer free credit tracking, alerts for changes, and tips for improvement.
Recommended tools:
Credit Karma (Experian & TransUnion)
Credit Sesame (Equifax)
Your own bank or credit union’s credit tracking tool
Understand Mortgage Credit Score Models
Mortgage lenders typically use a tri-merge credit report, which pulls data from all three bureaus. They often go by the middle score.
For example:
Equifax: 680
Experian: 700
TransUnion: 710
Your qualifying score would be 700 in this case. Improving any one of your lower scores can raise the middle score lenders use.
Start at Least 6 Months in Advance
Credit improvement takes time. Ideally, start your credit cleanup 6–12 months before you plan to apply for a mortgage. This allows time to:
Dispute errors
Pay down balances
Build a solid payment history
Rushing the process may lead to missed opportunities or higher mortgage costs.
Final Thoughts from SmartKey Lending
Improving your credit score before applying for a mortgage isn’t just about securing loan approval—it’s about unlocking better terms, lower interest rates, and greater financial stability in your homeownership journey.
At SmartKey Lending, we help borrowers of all types—from first-time buyers to real estate investors—navigate the mortgage process with confidence. Whether your credit is excellent or still in progress, our expert team can offer strategies, loan options, and personalized guidance tailored to your financial situation.
Ready to buy your dream home? Let’s make sure your credit is, too.
