Your credit score doesn’t just decide whether you get approved for a mortgage. It decides how much that mortgage will cost you. According to FICO data, a borrower with a 620 score might be offered an interest rate nearly a full percentage point higher than someone with a 760. On a $300,000 loan, that could mean over $50,000 in extra interest over 30 years. If you’re planning to buy a home in the next year, the time to fix your credit is right now. It won’t happen overnight, but a few focused steps can move your score significantly. Start by reviewing our Home Buying Checklist Every Smart Buyer Needs (2025 Guide) so you understand every piece of the process, not just the credit side.
Here’s what to do, step by step.
Know Where You Stand — Pull All Three Credit Reports
You can’t fix what you haven’t seen. Start by pulling your credit reports from Equifax, Experian, and TransUnion. You’re entitled to a free report from each bureau once a week through AnnualCreditReport.com. Don’t rely on a random score from a banking app. Mortgage lenders use a tri-merged report, and the lowest of your three scores often counts. Each bureau may have different information — an error on one report can drag you down even if the other two are clean.
Dispute Inaccuracies Before They Cost You
Read every line carefully. Look for late payments you actually paid on time, accounts that aren’t yours, and balances that are higher than they should be. A single error, like a 30-day late that you never missed, can drop your score by 20 points or more. Disputes usually take 30 days to process, so start immediately. If a collection account is older than seven years, ask the bureau to remove it. A single removed item can lift your score by fifty points.
Cut Down Your Credit Card Balances
Your credit utilization ratio — how much you owe versus your credit limits — is the second biggest factor in your FICO score, right after payment history. Going from 50% utilization to 30% can move your score faster than almost anything else. For the biggest impact, get balances below 10% and keep one or two cards at a $0 balance. Never run a balance on a card in the month before you apply for a mortgage. Lenders see your current statement balances when calculating utilization.
Let’s be specific. If you have a card with a $5,000 limit and a $3,500 balance, you’re at 70% utilization. Pay it down to $1,200, and your utilization drops to 24%. That alone could add thirty points to your score. If you can’t pay it off all at once, pay it down in chunks. Every dollar helps.
Use the Snowball Method to Pay Down Fast
List your cards from smallest to largest balance. Pay the minimums on everything except the smallest one, and put any extra cash into that card until it’s gone. Then move to the next. It’s not the most efficient in terms of interest rate math, but it’s psychologically satisfying. Momentum matters. You can also call your credit card issuer and ask for a higher limit. If your balance stays the same, a higher limit drops your utilization. The catch: don’t treat that extra limit as a reason to spend more.
Build a Bulletproof Payment History
Your payment history accounts for 35% of your FICO score. Without a recent streak of on-time payments, nothing else you do will move the needle. Set up autopay on every credit account, or put reminders in your phone two days before the due date. One trick that works: call each card issuer and ask to move your due date to the first of the month. Then schedule the payment for the day after your paycheck arrives. You’ll never be late again.
If you have no credit history at all, consider getting a secured credit card. You put down a cash deposit, and the bank reports your payments to the bureaus. After six to nine months of on-time payments, you’ll have a score that satisfies most lenders.
Fix a Missed Payment With a Goodwill Letter
If you have a late payment that was a genuine mistake — maybe you were in the hospital or lost your job — write a goodwill letter to the creditor. Politely explain what happened and ask them to remove the negative mark. They don’t have to do it, but many will if you’ve been a long-time customer. It takes five minutes to email, and it could save you from paying a much higher mortgage rate.
Avoid Opening New Credit Accounts Before You Apply
Every new credit inquiry drops your score a few points. New accounts also shorten your average credit history, which can push your score down further. That furniture store card offering 10% off is not a deal if it costs you thousands in mortgage interest. Don’t open any new credit cards, auto loans, or personal loans during the six months before you apply for a home loan. If you’re already working with a mortgage broker, ask them before you open anything. They’ll tell you exactly how much damage a single inquiry might do.
Knock Out Old Collections and Charge-Offs
An unpaid collection looks worse than a settled one. If you have a collection account, try to negotiate a settlement for less than the full amount, and get it in writing. A settled collection is still a negative, but it looks far less risky to an underwriter. For medical collections, you can sometimes negotiate what’s called a pay-for-delete agreement. You pay the balance, and the collection agency removes the account from your credit report. Not every agency will agree, but it’s worth asking. Removing one collection can boost your score by 40 to 70 points.
One common myth: paying off an old collection will “restart the clock” on how long it stays on your report. That’s not true. The reporting period is based on the original delinquency date, not the payment date. So pay it off if you can.
Get Serious About Your Debt-to-Income Ratio
Improving your credit score isn’t the only thing that matters. Your debt-to-income ratio (DTI) tells a lender what percentage of your gross monthly income goes toward debt payments. A DTI above 43% is risky. If you can pay off a small car loan with a $350 monthly payment, that does more for your DTI than paying off a $5,000 credit card with a $100 minimum payment. Focus on debts that have the highest monthly payment first. To get a realistic picture of what you’ll need to bring to the closing table, read our breakdown of How Much Money Do You Really Need to Buy a Home.
Here are three ways to lower your DTI before you apply:
- Pay off the smallest loan that has a big monthly payment, like a car loan or student loan.
- Increase your income with a side hustle, a raise, or a part-time job — even an extra $300 a month helps.
- Delay financing any major purchase, such as a new car or furniture, until after you close.
How Long Does Credit Repair Really Take?
Credit repair follows a predictable timeline. An old late payment stops hurting after two years and falls off completely after seven. A hard inquiry stays on your report for two years but only affects your score for twelve months. A bankruptcy can remain for seven to ten years. If you lower your utilization and fix errors, you can see meaningful gains in three to six months. For bigger issues, give yourself a year of consistent work before applying. Want to know how lenders think when you apply? Our guide on 17 Home Buying Secrets Banks Hope You Never Learn gives you a peek behind the curtain.
What If Your Score Isn’t Perfect Before You Apply?
Sometimes you can’t wait a year. If your score is below 620, you can still qualify for an FHA loan with a 3.5% down payment, but the interest rate and mortgage insurance premiums will be higher. Some lenders offer manual underwriting, where they review your entire financial profile instead of a single credit score. If you have a bankruptcy or foreclosure in your past, you’re not out of options. Check out our detailed roadmap on Buying a Home After Bankruptcy and our list of 7 Strategies That Actually Work for Bad Credit. You still have paths forward.
Remember, even a 20-point improvement can make a tangible difference in your mortgage rate. Start with the steps above, track your progress monthly, and pull your reports again in 90 days. You’re not looking for a perfect score — you’re looking for a better loan, and every point you add now pays you back for the next 30 years.