How to improve your credit score

Practical ways to increase your credit score

Reviewing your credit score is an important step when you are buying or refinancing a home. That’s because lenders like Freedom Mortgage use your credit score to help decide whether or not you qualify to have your mortgage application approved. We also use your credit score to help determine the interest rate we may be able to offer you.

As a result, having a higher credit score can increase your chances of getting approved for a mortgage and can help you earn a lower interest rate, too. Learning how to improve your credit score is worth the time!

How to request your free credit report

The first step is to request copies of your credit report from the three main credit bureaus: Equifax, Experian, and TransUnion. These organizations are required, by law, to provide you with a free copy of your credit report once every 12 months.

To request your free copies, visit AnnualCreditReport.com or call 877-322-8228. You may order reports from all three companies at the same time, or you can stagger your requests so that you receive credit reports from different credit bureaus over the course of a year.

How to check your credit report for errors

The next step is to review your credit report for errors. These errors can include account payments made on time that have been reported as late, an open credit account that has been reported closed, incorrect credit account balances, and/or incorrect credit limits. Errors like these might cause the credit bureaus to report you as having a lower credit score than you deserve.

You can dispute mistakes or outdated items in writing for free. To find a sample dispute letter, go to Consumer.FTC.gov and search for "sample dispute letter." Once notified of a mistake on your report, a credit bureau has 30 days to investigate and respond. If the information can't be confirmed, then the credit bureaus must remove the item from your report.

Ways to improve your credit score

Your history of paying bills, the amounts you owe on credit accounts and loans, and the length of time you’ve had accounts and loans are some of the factors that affect your credit score. When you want to increase your credit, think about these things:

• Pay your bills on time. Making late payments or partial payments can negatively affect your credit score. Focusing on paying bills on time—and in full—can help to improve it.
• Pay your bills consistently. Paying your bills consistently over a period of time might also help improve your credit score. The credit bureaus might rate you higher if you have a longer history of paying your bills on time, rather than a shorter history.
• Pay down high balances. Owing large amounts of money on credit card balances or other loans might negatively affect your credit score. For example, if you are carrying large balances on several credit cards, paying down these balances might increase your credit score.
• Opening new credit accounts. Opening new credit accounts—especially opening several new accounts over a short period of time—might lower your credit score. This sometimes happens to homebuyers who open accounts with furniture stores or home improvement stores while their mortgage application is under review. It’s a good idea to wait until you close on your mortgage before you make major purchases for your new home.

Keep in mind that it may take time for these techniques to improve your credit score. Changes are unlikely to happen overnight. However, having a good plan for managing your existing credit might benefit you in the long term.

* Freedom Mortgage is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such. Consult a financial advisor before making important personal financial decisions.

Last reviewed and updated March 2024 by Freedom Mortgage.