How to Get Your Credit Ready to Buy a House

Last Updated 1/12/2015

The housing market is continuing to improve and many first time buyers are ready to enter into homeownership. Federal guidelines have strict credit requirements for lenders to adhere to get credit to buy a house.

Get your credit ready to buy a house with these 8 simple tips:

1- Check your credit report.

The very first step to get your credit ready to buy a home is to know what is on your credit report. You want to have a thorough understanding of what your lender will be looking at on a mortgage application. You can access a free credit report at, it is the only website where the reports are free and have no strings attached. The reports you can access are supplied by the three major credit bureaus: Experian, Equifax, and Transunion.

2- Dispute any inaccuracies.

After reviewing your credit report take a thorough examination of what is listed on it. Many inaccuracies can show up on credit reports such as a loan that is not yours, or a late payment that never happened. Resolve any inaccuracies and check to see that they’ve been fixed on your credit before applying for a mortgage. You should also get something in writing that proves the resolution in case it take a while to correct with the credit bureaus.

3- Pay off any unresolved debts.

If there are any charged off loans or collections on your credit report pay them off in full. Lenders understand that people can run into financial hardships but will want to see that you’ve paid back the debts in full. Completely paying off these old delinquent debts will show that you’ve made the commitment to get your finances back in order.

4- Have diversified trade lines.

There are different types of loans that will report to the credit bureau, and it is wise to have a couple of each type on your credit. Mainly you want to focus on having a couple of revolving accounts and installment accounts. An example of an installment loan would be an auto loan or student loan. Installment loans show that you can handle a larger loan amount with set monthly payments. A credit card is an example of a revolving account. Credit cards that are not maxed out and have a positive payment history will reflect well on you.

5- Leave old tradelines opened.

The amount of time you’ve had credit is one of the factors that impacts your credit score. Because of this, you should try to leave your old tradelines opened. That means the small credit card that you opened back in college should be used every few months to keep the credit line open. This length of credit history will have a positive impact on your credit score. Lenders will see that you are not brand new to using credit and will feel more secure with approving a mortgage.

6- Avoid opening new credit lines.

While preparing for a mortgage you should hold off on opening any new credit lines. Mortgage lenders will look at how many inquiries are listed on your report and how many lines of credit were recently opened. An applicant that seems to be steadily increasing their debt and applying for new trade lines will be a red flag to a lender.

7- Keep a positive payment history.

Making your payments on time is the biggest factor contributing to your credit score. Lenders do not like to see any late payments on your credit within the last 24 months. A late payment indicates that you are either experiencing financial struggles or are being financially irresponsible. Be sure to build up a strong credit history with payments that are always made on time.

8- Reduce overall amount of debt.

One of the biggest qualifying factors on a mortgage loan application is the debt to income ratio. A debt to income ratio is calculated by dividing the amount of credit obligations you have monthly by your gross monthly income. It is wise to reduce your total amount of debt to keep your debt to income ratio as low as possible and increase your chances of being approved for a mortgage.