How to Improve Your Credit Score to Buy a House in 6 Months

Buying a home is now increasingly expensive, compared to years ago. With a combination of low inventory, rising demand, inflation and the Federal Reserve raising interest rates — more and more are finding it difficult to enter homeownership. In fact, housing affordability hit record lows in recent months, according to Yardeni Research and the National Association of Realtors.

Many of these factors are out of your control — so don’t worry about it too much. It’s good to be mindful of the external factors, but more importantly — things you have an influence on like your credit score and budget should be more top of mind.

Moreover, if you’re trying to improve your credit score in a short time span to purchase a home — your focus should be on getting your score as high as possible.

Here’s how you can get your credit score quickly moving in the right direction.

Talk to a loan officer about your options

The first part of the home shopping process is talking to a certified mortgage loan officer to get prequalified and discuss your options. The loan officer will be able to discuss your current financial situation as well as your current credit score to see if you can qualify for the amount of money you need to purchase a home.

Additionally, they can pull your credit report and discuss if there are issues that may prevent you from being approved. These could include past-due medical debts, significant credit card debt or recent credit inquiries, among others.

Analyze your credit report for errors

If you wish to begin analyzing things on your own before talking to a lender, you can request your credit report for free. This report details your history of handling debts and creditors and gives you an overall score. The credit score you’re given is used to measure your reliability to pay bills back on time.

However, these reports aren’t always accurate. In fact, one-third of people in a study found they had errors on their reports that was negatively affecting their overall score. And the lower your score, the more likely you will either receive less favorable loan terms — or be denied altogether.

So if you haven't reviewed your credit report recently, here’s what to look for:

• Identity errors. This could be misspellings, inaccurate addresses or accounts listed belonging to someone else
• Incorrect reporting. This includes accounts reported as open that are now closed, accounts incorrectly reported as late or delinquent or accounts that appear more than once with different creditors.
• Balance errors. Accounts could be listed with an incorrect balance or available credit line.
  

If you discover any of these errors, contact the appropriate credit bureau in charge of your card. Here are the best steps to do that, according to the Consumer Financial Protection Bureau (CFPB):

• Contact information for you including complete name, address, and telephone number
• Report confirmation number, if available
• Clearly identify each mistake, such as an account number for any account you may be disputing
• Explain why you are disputing the information
• Request that the information be removed or corrected
• Enclose a copy of the portion of your credit report that contains the disputed items and circle or highlight the disputed items. You should include copies (not originals) of documents that support your position.

Ask for higher credit limits

Your credit score is divided into five categories: payment history (35% of your score), amounts owed (30%), length of credit (15%), new credit (10%) and type of credit (10%).

The second highest category is amounts owed, which also considers how much of your available credit you’re using. This means that if you have $10,000 in available credit and are using $5,000, banks and financial institutions see that as someone who needs to use 50% of their available credit — which will drag down your credit score.

The best way to counteract that is to call your credit card company and ask for a credit line extension. So if your current credit line is $10,000 and you get it increased to $20,000, that will decrease your total credit utilization — and help your credit score.

It’s free to ask for a credit line extension and can be done by calling customer service. If they ask why you need more credit, you can say that you have large purchases coming up and you need more credit. In the best case scenario, they will approve you for a larger credit line. In the worst case scenario, they will simply decline you.

If you’re approved for a further credit line, your credit utilization ratio will decrease — which will help your credit score jump forward.

Become an authorized user of a trusted friend or family member

If you have a trusted friend or family member with excellent credit and you can trust to pay their bills off, there’s a simple way to ‘get credit’ for their efforts.

If they have a credit card that offers free authorized users, they should be able to add you to the account. By doing this, the credit that your trusted friend or family member has will be connected to your credit report. So if they have a credit card with a $30,000 credit line, this card will then be listed on your credit report.

The best part of this strategy is that you don’t even need to spend on the new card issued to you. Your friend can hold the card and you will get all the ‘credit’ for their issued credit and good financial history.

Bottom line

If you want to improve your credit score to buy a home in the next six months, you may want to reconsider your strategy. Improving your credit score is a marathon, not a sprint. The more time you give yourself to improve your credit, the better lending options you will have for your home — which can save you tens of thousands of dollars in interest.

If you give yourself a year, you will give yourself enough time to improve your credit score, continue saving for a down payment — and most importantly — give you the runway you need for the financial security and independence you’re striving for.

Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC.