Fix Your FICO: 5 Ways to Get Mortgage-Worthy Credit

Credit, credit, credit…you’re probably tired of hearing how important your FICO credit score is when applying for a mortgage, and that’s certainly understandable. But like it or not, lenders favor those with higher scores.

improve credit score

This doesn’t mean that lower FICO scores make mortgage approvals impossible, but in this case, bigger is always better. So if you’re one of the millions with a less-than-stellar score, it’s in your best interest to improve it, and it takes a little work, but is far from impossible.

Here’s how:

1) Read and Review

Your first step, after receiving your credit reports from Equifax, Experian, and TransUnion, is to carefully review each one. Understand that your credit score is based on information from these reports, and that your payment history on these accounts is one of the most important factors.

FICO reviews this history, comparing accounts paid on time versus accounts with delinquencies, so take a look at any accounts that are past due, and get them caught up as soon as possible. Getting everything current goes a long way toward FICO improvements.

2) Verify and Dispute

Credit reports aim to be accurate, but are not infallible. Therefore, it’s up to you to make sure everything is correct. Credit bureaus are legally obligated to investigate disputes and report back to you, so if you find something that you’re sure is incorrect, report it (you’ll find instructions on how to do so on the report and/or the bureau’s website).

Each negative item that’s removed is a major step in the right direction.

3) Settle Up

Charge-offs, collections, liens, judgements—any one of these is a big red flag. Make a list of any and all of them from the past 24 months, with the most recent at the top, and one by one, settle the accounts with the creditors and collectors. Often, creditors are willing to lower the balance if you’re willing and able to pay in full, so go ahead and negotiate.

Of course it’s not easy to come up with the money to do so, but make it a priority, using your tax return, for instance, to improve your credit, rather than making an unnecessary purchase.

4) Request Forgiveness

We all make mistakes from time to time, and creditors know that (sort of). If you have a recent delinquency in an otherwise punctual account, call them and ask for the late payment to be removed from your credit report. While this isn’t a guarantee, you’d be surprised by how often it works, and it certainly can’t hurt to make the phone call. In fact, it can only help.

5) Eliminate and Consolidate

You might find it easier to spend $20 on one card, $20 on another, and $10 on yet another. But FICO doesn’t like it. Your credit score depends in part on how many of your cards have balances, with fewer, of course, being better. So consider getting rid of some cards (and paying off their balances), instead spending what you can afford on one low-interest card, and keeping its balance as low as possible. Your spending will be more streamlined, and your score will improve accordingly.

You’ll find that after making these relatively simple improvements, you’ll have a significantly better FICO score—and a much better chance of mortgage approval—in no time.

If you’re buying or selling a home in the Boston area and are in need of a mortgage, or have any mortgage-related questions, contact me at any time for advice or help.

Phil Ganz (117 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317

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