Buying a Home in 2024? 3 Credit Moves to Make — and 3 to Avoid

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To qualify for a good rate on a big loan, your credit score is vitally important. Read on to learn how to boost yours ahead of applying for a mortgage. 

I don’t know about you, but I’m gearing up to buy a house in 2024. It’s taken almost two years of different personal finance moves (including paying off debt and saving money) to reach this point, but I’m finally almost ready.

If you’re in the same boat as I am, you’ve likely also been waiting a long time and probably want to ensure that no credit missteps prevent you from securing a mortgage loan. And rates aren’t exactly competitive these days — according to Freddie Mac, the average rate for a 30-year mortgage loan is 6.61% as of this writing. So the better your credit score, the more likely you are to get the lowest rate available.

So here’s a list of credit dos and don’ts to help you get in the best shape possible to apply for mortgage pre-approvals and find the right lender and home loan for you.

Do this…

Here are your credit must-dos before you give mortgage lenders a peek at your finances.

1. Keep current on payments

Ideally, you pay your creditors on time, every time, but if you’ve been a bit lax about that in the past, it could be reflected in your credit score. So right now, ahead of opening your finances to mortgage lenders, resolve to make every payment to credit card and loan issuers by its due date. Payment history is the biggest part of your FICO® Score (35%), so this move is vitally important if you want to show lenders the best credit score possible.

2. Pay down debt

If you want to give your credit score some extra polish before applying to lenders for mortgage pre-approvals, consider paying down some existing debt, if at all possible. This is a good idea for two reasons. First, you’ll be able to go into a huge loan commitment (a mortgage) with less money already owed. Won’t it be nice to stress less about the monthly bills at a time like this?

Second, paying down debt has a positive impact on your credit score. I paid off all my existing debt not long ago, and my credit score climbed by 100 points. The amount you owe creditors is 30% of your FICO® Score, so you’re sure to see some improvement if you can lower your existing debt.

3. Check out your credit reports

Finally, hop on over to AnnualCreditReport.com, where you can access your credit reports from the three major consumer credit bureaus. Your goal is to check them for accuracy. If you spot any errors (like a delinquent account that never actually belonged to you), you can dispute the entry with the credit bureau to have it removed, and bump your credit score in the process.

…Not that

Now that you know what to do, here’s what not to do.

1. Open new accounts

A new credit card with a sweet sign-up bonus sounds pretty good ahead of buying a home, right? Yes, it does — but since you’re about to have mortgage lenders running credit checks, you really want your credit score in good shape. A new credit inquiry dings your credit by a few points, and if you’re hovering between two credit score ranges, your new credit card could make it difficult to get the best mortgage rate possible.

2. Make big purchases

The prospect of having a new house to furnish is exciting, but now is not the time to start shopping for a new couch or a second fridge that you’ll be purchasing on credit. Mortgage lenders want to see that you’re responsible with credit, and making big purchases ahead of taking on the financial commitment of a home is a bad move. Plus, do you really want more debt to pay off right now, in addition to dealing with how much money you’ll be sinking into a down payment, closing costs, and moving itself?

3. Close credit accounts

As you’re cruising through your personal finances ahead of applying with mortgage lenders, you might be feeling tempted to shed some credit card dead weight. Unless you have a compelling reason to close a credit card account soon before you start mortgage shopping (such as an annual fee on a card you don’t use), resist the urge. If you’d be losing a long-standing account or one with a high credit limit, this is a move best avoided — you could lose some credit score points in the process. Closing an account impacts both your length of credit history and credit utilization ratio (if you have balances on other cards).

In short, if you’re buying a home in 2024, now is the time to avoid making waves with your credit. Ensure your credit report is accurate, stay the course with on-time payments, and hold off on closing old accounts or opening new ones until the dust has settled and your mortgage loan has closed.

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