If you're planning to buy your first home, your credit score can either open doors — or quietly slam them shut. Lenders rely on your credit history to decide whether to approve you for a mortgage and what interest rate to offer. The better your score, the better your chances.
The good news? You can build or improve your credit even if you’re starting from scratch or recovering from financial setbacks. Here's how to do it strategically before applying for a home loan.
Why Credit Matters in Homebuying
Mortgage lenders use credit scores to assess risk. A high score tells them you’re likely to repay your loan on time. A lower score signals more risk, which may lead to higher rates or even denial.
- 740+: Excellent — top-tier rates
- 700–739: Very good — favorable terms
- 660–699: Good — may qualify, slightly higher rate
- 620–659: Fair — higher rates, limited programs
- <620: Poor — may need FHA or credit improvement
Step 1: Check Your Credit Reports
You can’t fix what you don’t see. Start by pulling your credit reports from all three bureaus — Experian, TransUnion, and Equifax — at AnnualCreditReport.com.
- Look for errors like incorrect balances, old accounts, or accounts you didn’t open
- Dispute any inaccuracies — these can lower your score unnecessarily
Reviewing your report is the first step to understanding where you stand.
Step 2: Pay Every Bill On Time
Your payment history is the most important part of your credit score — accounting for 35% of the total. Set reminders, enable autopay, and prioritize consistent payments.
Even one missed payment can cause your score to drop. Multiple on-time payments over several months can build trust with lenders.
Step 3: Reduce Your Credit Card Balances
Your credit utilization ratio — the amount of credit you're using versus what's available — should be under 30%, ideally below 10%.
For example, if you have a $1,000 limit and carry a $500 balance, that’s 50% utilization — which may hurt your score.
- Pay down balances aggressively
- Spread out spending across cards (if applicable)
- Avoid maxing out any single card
Step 4: Keep Old Accounts Open
Length of credit history counts for about 15% of your score. If you’ve had a credit card for years, don’t close it, even if you don’t use it much.
Older accounts improve your average age of credit, which can positively impact your score.
Step 5: Use a Credit Builder Card or Loan
If you’re new to credit, consider a:
- Secured credit card — requires a deposit but builds credit with each payment
- Credit builder loan — payments are held in a savings account and reported to credit bureaus
These tools are designed for people building or rebuilding credit — and they work as long as you pay on time.
Step 6: Avoid Opening New Credit Right Before Applying
Every time you apply for a credit card or loan, the lender does a hard inquiry — which can temporarily drop your score by a few points.
In the months leading up to applying for a mortgage, avoid opening new accounts unless absolutely necessary. Multiple inquiries can signal financial instability to lenders.
Step 7: Monitor Your Progress
Use tools like Credit Karma, Experian Boost, or your bank’s credit dashboard to monitor your score. Progress may take time, but you should start seeing improvement within 3–6 months of consistent good habits.
Bonus: Add Rent or Utility Payments to Your Credit
Some services let you report rent, phone, and utility payments to credit bureaus — which can help build a score if you lack traditional credit.
- Experian Boost adds utility/streaming bills to your credit file
- Rental payment reporting services can show on-time rent history
What Score Do You Need to Buy a House?
- FHA loan: 580+ (or 500 with 10% down)
- Conventional loan: 620+
- VA/USDA: Flexible but generally 620+
A higher score gives you more options and lower costs. But even if you’re not perfect, there are programs designed for first-time buyers with modest credit histories.
Conclusion
Your credit score isn’t set in stone. With the right plan, you can build a stronger profile and increase your chances of getting a home loan that works for your budget.
Start early, be consistent, and know that every step you take gets you closer to the front door of your first home.