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How to Whip Your Credit Into Shape Before Buying a Home

Mortgage interest rates have dominated the news lately, but there's another aspect of buying a home people shouldn't forget about: credit scores.

It's one of those things many individuals don't even think about it until it's time to make a big purchase. But a poor credit score can be a significant factor in lenders determining whether they will approve someone for a loan.

A credit score of 700 or more will put consumers in a great position to get approved for any loan they apply for, but only half the population of the U.S. meet this criteria, according to But for those who don't quite reach that mark, hope is not lost to get a mortgage because there are several things individuals can do to improve their credit scores, the source noted.

Applicants with a higher credit score are more likely to receive a lower interest rate on the mortgage loans, so there is a big incentive for people to improve it before they apply. A strong credit score can potentially slash an individual's interest rate in half, according to U.S. News and World Report.

One of the easiest ways for an individual to improve their credit score is to pay down existing credit card balances and pay bills on time. Applicants who do this are likely to see a drastic improvement in their credit in as little as one month, reported. But not everyone might be in a financial situation to pay down debts quickly, so they need another option. Applicants can also become an authorized user on a family member's credit line, which allows you to share their credit history, the source noted. This is a good option for those who need a little more time to improve their scores but want to buy a house in the near future.

How credit impacts jumbo loan qualification

While it has never been easier to qualify for a jumbo loan, these high-value mortgages do come with some distinct limitations. One such limitation is that, even for more affluent buyers with significant capital, credit score still plays a big role in terms of qualification and what rates they will be offered on their jumbo loan. In fact, The Wall Street Journal reports that in a recent survey, nearly 40 of respondents who earn $100,000 or more a year said they still worried about their credit score being too low.  

"A credit score of 720 or more is ideal for a jumbo loan."

Traditionally, a score of 720 or higher is required to qualify for the best rates and conditions for a jumbo loan. At 680 or lower, borrowers are likely to run into issues, according to John Walsh, CEO of Total Mortgage Services. Some lenders may be willing to look beyond lower scores if the borrower has sufficient assets to back the loan. 

A new year, a new time to check your credit

For those considering applying for a home loan in the new year, your credit will be one of the most important factors determining your interest rate and eligibility. Every consumer in the U.S. is entitled to a free copy of their credit report from each of the major credit reporting agencies once a year — yet only one in five actually requests it annually.

It is incredibly important to regularly check your credit report. Often, consumers are surprised by the information that they may reveal, including old bills, traffic fines and violations, utility bills from a past residence, or medical bills they accidentally forgot to pay and have gone into collection. These charges can add up quickly, lowering your overall score and potentially costing you far more than it would to pay them off over the lifespan of a loan.