Good credit scores are key to getting a home loan at a reasonable interest rate.

Recent data show millions of Americans have credit scores lower than 649. It’s not impossible, but getting mortgage loan approval with scores in the 600s will be more difficult and more expensive.

Don’t despair. There are many ways to pump up to a healthy credit score, but like with any exercise program, it will take a little time, discipline and planning. Here are some of the tips you will hear from credit score experts.

Start with the obvious:

• Borrow only what you can pay back.


• Reduce your debt with a structured payment plan.


• Make payments on time.


• Avoid excessive credit requests or inquiries.


• Check your report annually to make sure there is no erroneous information (A 2013 study by the Federal Trade Commission found that one in five consumers has a mistake on his or her credit report. Bad information can adversely affect your credit score).

Old credit? Good credit!

• A good record of payments on an established credit account can benefit your score. Use established cards conservatively and occasionally, and make regular payments.


• Keep a low balance. A lower “credit utilization ratio” is better.

Look out for credit traps:

• Too Many Accounts: Stores, gas stations, even baseball games and concerts – The world is awash with new credit applications in exchange for gifts or one-time discounts. Too many new credit requests can lower your score, and too many payments can be difficult to manage. It’s not worth it in the long run.


• Balance Transfers: If you’re like most Americans, you get about a thousand of these a year, offering “low introductory rates.” There can be hidden qualifiers, and again, too many credit requests can lower your score. A better option is using the offers to leverage a better interest rate from your current card.


• Credit Invisibility: Don’t be afraid to use credit. Many young people have sworn of credit entirely, becoming “credit invisible.” Having no credit can be as bad as low credit. Set up payment reminders and pay your bills on time.

Variety is good:

• Maintaining an excellent payment schedule on a conservative combination of revolving, installment and secured financing will yield a higher score in the long term. But still, don’t open a bunch of accounts you don’t need too quickly. It’s a process.

We are here to help you with all your questions about home loans.