It should be noted that you should begin these steps before you begin to look for a new home. This will allow some time for your score to improve and for the lenders to see that you have been responsible with your money for longer than just during the time before you wanted to buy a home.
- Make sure that you are paying your bills on time — It's imperative that you are paying your regular bills and rental payments on time every month. This gives your FICO score a boost as it shows that you can be trusted to pay off bills in a timely manner.
- Don't spend more than you have — For most of us, we are carrying credit card balances. But while this is a necessity in some cases, to lenders, it can look like you are trying to live beyond your means. If you do have large credit card balances, work to lower them to less than 50% of the overall credit limit.
- Don't open new credit cards unless you need to — This can look, again, like you are trying to live beyond your means by getting more lines of credit.
- Don't close credit cards — While this seems contradictory, when you close credit cards, you are effectively reducing the credit history you have. You want to hang onto the cards that you have, even if you're not using them. This will show that you can manage debts over the long term.
- Try to look for a loan within a certain time period — When you are shopping for loans over the course of a year, it can look as though you aren't really serious about finding a loan for your needs. Instead, try to only apply for loans when you are serious about taking them on.
- Get a copy of your credit report — Everyone in the United States is entitled to one free copy of their credit report each year, and additional ones can be purchased for a nominal fee. Look over your credit report to see if it's accurate and if not, call up the major credit reporting agencies to get the errors corrected — Experian, Equifax, and TransUnion.
- Use the credit cards you have responsibly — By having balances on your credit cards and then paying them down each month, you are showing that you can manage your money. The point of improving your FICO score is not to stop using credit, but to learn to manage it.
Improving your FICO score is not something that will happen overnight. For many would-be homeowners, this is a process that will begin at least a year before you begin to shop for a home loan. And while it might seem tedious, it is actually preparing you for the process of being a responsible homeowner.
Likewise, the lenders you go to will see that you are serious about being a responsible homeowner and will be more willing to offer you reduced interest rates and other special offers. Your hard work and sacrifice will pay off in the end.