Number 5 on mailbox with white picket fence behind it

5 Tips for Building Credit To Buy a House

TLDR

What You Need To Know

  • Your credit score is an important factor lenders will consider while they’re reviewing your mortgage application
  • Building your credit before you submit a mortgage application can help you get a better interest rate and loan terms
  • To buy a house, you typically need a credit score of at least 620, which puts you in the “fair” credit category

Contents

See what mortgage you qualify for

NMLS #3030

*See what you qualify for

We teamed up with Rocket Mortgage to help you get house-hunting sooner! Answer a few questions to get your commitment-free, personalized rate 💸

Get Started by selecting an option below

What kind of loan are you interested in?

What to expect

Tell us what you need and a representative from Rocket Mortgage will give you a call. You’ll have support at every step.

What kind of property do you want to purchase? What kind of property do you own?

Why we’re asking

Rocket Mortgage® can provide a more accurate rate estimate if they know what kind of property you’re interested in.

NMLS #3030
How do you use your property? How would you use this property?

Why we’re asking

Having a little more information upfront helps Rocket Mortgage® provide a personalized rate faster.

NMLS #3030
When are you planning to buy?

Still House Hunting?

Hope you find your dream home soon! In the meantime, it’s never too early to know your rate.

NMLS #3030
Are you a first-time home buyer?

It’s all good:

Whether it’s your first – or second property – Rocket Mortgage® can provide you with a rate estimate.

NMLS #3030
Do you have a second mortgage?

It’s all good

If you have a second mortgage, it’s no problem. Letting us know helps to customize your rate.

NMLS #3030
What is your credit score?

Don’t know your score?

Don’t sweat it! Make your best guess. Credit scores range from 300 (low) to 850 (excellent).

NMLS #3030

Enter your contact info to get your rate

What happens next?

A representative from Rocket Mortgage® will be in touch to discuss your commitment-free, personalized rate. Then you can decide whether you’d like to lock it in!

NMLS #3030
Your information has been sent!

A home loan expert from Rocket Mortgage® will reach out to you soon with your personalized rate.

Your information has been sent!

A refinance expert from Rocket Mortgage® will reach out to you soon with your personalized rate.

For many of us, buying a home is the pinnacle of adulting. There’s just something about owning property that makes most of us feel accomplished – and with good reason! It takes time, effort and preparation to finally get those keys in our hands. 

And speaking of preparation, one essential step to owning a home is to build a good credit score. Your credit score (sometimes called your FICO® Score) tells a lender how you handle debt and debt repayment. 

Your credit score could be the difference between an affordable interest rate and struggling every month to keep your hard-earned roof over your head. We’ll break down the importance of good credit and show you how to build it fast to buy a home.

The Importance of Credit When You’re Buying a Home

When you’re buying a home, lenders will pore over every aspect of your finances, including your income, how much you’ve saved for a down payment, your debt, and – you guessed it – your credit score. 

Your credit score is an important factor that lenders will consider while they’re reviewing your mortgage application. And the higher your credit score is, the more you look like a reliable borrower. 

You can still buy a house even if your credit score is hovering in the poor-to-bad range. Just know that if you buy a house with a low credit score, you’ll likely deal with additional fees and pay a higher interest rate on your loan. 

You can also look into loans with lower credit score requirements, such as a Federal Housing Administration (FHA) loan or a Department of Veterans Affairs (VA) loan. Both loans are backed by the federal government but have different eligibility requirements. Consult with a lender to see if you qualify for either loan. 

So you’ve got options if your credit score is low. But we think the wisest one would be to build your credit to buy a house. If that means pushing pause on your dreams of homeownership, remember, that delay will put you in a stronger position when you apply for a home loan. 

Now let’s review some strategies to boost your credit score. 

What Credit Score Do You Need To Buy a House?

To buy a house, you typically need a credit score of at least 620, which puts you in the “fair” credit category. A 620 credit score should be your bare minimum goal. A credit score north of 740 would be even better and would qualify you for the lowest rates, but can take longer to achieve. 

How Long Does It Take To Build Credit Before Buying a House?

It generally takes 6 months to a year to build or repair your credit. This may feel like a lifetime, especially if you were hoping to buy sooner. But if you stay on track with our credit-building strategies, you’ll build credit as efficiently as possible. 

5 Ways To Build Credit Before Buying a Home

Building your credit before you submit a mortgage application can help you get a better interest rate and loan terms. Take advantage of some of these strategies to bring your score up. 

Apply for a credit card and keep balances low

Are sirens going off in your head about using a new credit card? Well, credit cards are one of the most effective ways to build credit as long as you use them responsibly. 

Responsible credit card use looks like paying off your card(s) in full every month to avoid carrying a balance. If you have cards, you know credit cards charge interest on balances, which makes your debt grow. And establishing an on-time payment history will increase your score over time. 

If you can’t pay off your balance, keep it low to optimize your credit utilization ratio (think: how much of your available credit you’ve spent). Your credit utilization makes up a big part of your FICO Score. 

 If you can’t qualify for a standard credit card, look into secured credit cards. Secured credit cards require borrowers to put down a cash deposit that acts as their credit limit. If consumer cards are out of your reach (for now), consider secured cards to build credit.

Become an authorized user on someone else’s credit card

If you know a family member or friend who is a responsible credit card user, ask them if they would be willing to add you as an authorized user on one of their credit cards. This can be a great way to build credit without opening a new account. 

Triple-check that your friend or relative makes their payments on time. If they miss payments, make late payments or max out the card, it will damage both your credit scores.

Pay off delinquent accounts and make on-time payments

Delinquent accounts on your credit report are accounts with late payments, charge-offs, collections or judgments. Get these paid off as soon as possible to minimize the impact on your score.

You may be able to negotiate with your creditor(s) or collections agency to get lower payoff amounts. 

We cannot stress enough the power of on-time payments. Late or missed payments will damage your credit score. Even if you can only make minimum payments on your bills, make sure you make those payments on time. 

If keeping track of your bills feels like a part-time job, see if you can set up autopay so you can stop worrying about your bills getting paid on time. 

Avoid getting new debt and keep credit inquiries to a minimum

If you’re diligently building credit to buy a house, avoid taking on new debts like car loans or personal loans. Taking on more debt means another bill and another hard credit check by a lender. A hard credit inquiry can stay on your credit report for 2 years.

Aside from avoiding hard credit checks, avoid piling on debt because it will increase your debt-to-income ratio (DTI), a crucial factor to get a mortgage loan. The less debt you carry, the better your DTI will be when you’re ready to buy a home.

And in case you’re wondering, a soft credit inquiry – like checking your credit score, requesting a copy of your credit report or getting a preapproved credit card offer – won’t impact your score. 

Monitor your credit report and report any errors

You can request a free credit report each year from the three major credit bureaus – Equifax®, Experian™ and TransUnion® – at AnnualCreditReport.com.

Keep an eye on your credit report to point out anything that needs to be disputed and to ensure accuracy. In some cases, you may even improve your credit history and credit score after you correct inaccurate information.

Rome Credit Wasn’t Built in a Day

Homeownership is #goals. And it’s an achievement you shouldn’t abandon even if your credit score could use some building up. Use our strategies to create a plan you can stick with, and you’ll be well on your way to picking the perfect “welcome” doormat for the front door of your new home.

Get approved to buy a home.

Rocket Mortgage® lets you get to house hunting sooner.

ICYMI

In Case You Missed It

  1. Avoid piling on debt because it will increase your debt-to-income ratio (DTI), a crucial factor to get a mortgage loan

  2. Closing a credit card will temporarily decrease your score and negatively impact your credit utilization ratio

  3. It generally takes 6 months to a year to build or repair your credit

You Should Also Check Out…