Here's how to get your score where you need it
By Lisa L. Gill
Excited to buy a new home in Austin, where I was planning to move, I applied to get preapproved by a mortgage lender. Preapproval seemed like the ticket to tour in-person those cozy Texas bungalows with sweet backyards whose online listings I’d been wistfully scrolling.
So imagine my disappointment when the lender came back and said that my Fair credit score of 647 meant their bank was unlikely to approve me for a loan. Even if I was greenlighted for what’s called a “subprime” mortgage, the lower score would likely trigger a higher interest rate, and therefore higher monthly payments I couldn’t afford.
I’m not the only one in this boat. About 1 in 16 Americans who applies for a mortgage is denied a home loan, according to the Urban Institute, a nonprofit research organization. And a too-low credit score is among the top reasons folks can’t get a mortgage, according to HSH.com, a home mortgage data collection firm.
Yet for most people, owning a home is still a key part of the American dream. For me, this dream was only partially out of reach. But it’s especially unattainable for Black and Hispanic Americans: Blacks are twice as likely to be denied mortgages as whites, and Hispanic Americans one and half times as likely, according to the most recently available figures in a report by the Federal Reserve (PDF). Compared with whites, Blacks who apply for a mortgage have average credit scores that are about 40 points lower, for Hispanics, credit scores are over 20 points lower, the same study found. They, along with Hispanics, are also more likely to lack sufficient data in their credit reports to even generate a score in the first place, according to research by the Consumer Financial Protection Bureau. (PDF) For more on racial bias in mortgage lending, watch BAD INPUT: Mortgage Lending, below.)
Home ownership, of course, is more than a measure of achievement or about a roof over your head. “In the U.S. it’s the way many families build wealth and security for the long-term,” says Melissa Koide, founder and CEO of FinRegLab, a nonprofit tech and financial research firm in Washington, D.C. “Yet, lots of people aren’t able to participate, especially minority households who don’t have credit in the first place or generational wealth to draw upon for a down payment.”
Some good news: Mortgage lenders may soon have new credit scoring models that will help more people qualify, says Joanne Gaskin, vice president for scores and analytics at FICO, a data analytics company that generates credit scores. Doing so could help more traditionally marginalized communities, according to the Urban Institute, but it won’t take effect until late 2025.
In the meantime, if you are looking to raise your score as you prepare for a mortgage loan application, the advice you’ve likely heard before still stands: Pay off all debts with collection agencies and ask that the record reflects the paid status on your report, says Bruce McClary of the nonprofit National Foundation for Credit Counseling (NFCC) who has provided debt counseling and credit score help to hundreds of consumers. Also, fix any errors on your report, and pay bills and loans off as much as possible or entirely, and always on time.
But there are other steps you can take, too. Instead of facing the risk of being denied or forced to accept expensive loan terms, I doubled down on improving my score, following McClary’s advice but also taking some different approaches. Here’s what I learned in the process.
Credit Scores 101
First, it helps to know the basics about those all-important three-digit numbers, which are used to make many financial decisions about you. They are based on information in your credit reports issued by the big three credit bureaus: Equifax, Experian, and TransUnion. Those reports contain details about how much debt you owe, what kinds of loans and credit you have and how long you’ve had them, and how well you’ve managed it all—for instance, by paying your bills on time.
Lenders use these reports and scores, along with other financial information, like your income and assets, to determine how likely you are to repay a loan, such as a mortgage.
But it’s more complicated still. I learned that each of us has not a single credit score but at least two dozen different ones, generated primarily by two companies, FICO and VantageScore. (FICO is used by 90 percent of lenders.) The most widely used FICO score is the FICO 8: different versions of it are used in decisions about credit cards and auto lending.
But to apply for a standard mortgage loan backed by the federal government, lenders currently rely on scores known as FICO 2, 4, and 5. These are compiled together into a mortgage report. These scores are a snapshot of your current credit circumstances along with historical data, and may penalize you more for one-off late payments of 30 days or more, according to Experian. (That’s what happened to me. My mother was suddenly hospitalized, and while I was with her, I missed a payment on a small bank loan, which eventually sank my score. I also had high credit utilization—more on that below.)
The new scoring models coming in 2025 from the Federal Housing Finance Agency (FHFA) will require lenders to use FICO 10T and VantageScore 4.0. These will use historical credit history covering a longer period and, importantly, will also factor in payments for rent, telecom, and utilities.
“The new models bring improved accuracy and a more inclusive approach to evaluating borrowers,” the FHFA said when their approval was announced.
Indeed, scores that include rent payments could help millions more qualify for mortgage loans. For example, 15 percent of Black Americans who were first-time-buyer mortgage applicants but were denied a loan could be approved if their on-time rental payments over 12 months were taken into consideration, according to research from the Urban Institute. For Hispanics, that figure is even higher at 21 percent.
Other benefits of the two new scores, FICO 10T and VantageScore 4: Neither will penalize you for bills that had gone into collections but were paid off, in the way older FICO scores do. And both reduce the impact of unpaid medical debt, according to the National Consumer Law Center, which evaluates changes in federal policies for consumers. The nonprofit said doing this will “greatly less[en] the harmful effects of these items on consumers’ creditworthiness.”
5 Steps to a Better Credit Score
For a good credit score, paying your bills on time, using credit sparingly, and taking out loans for only the essentials are must-dos. You should also dispute errors on your report by regularly monitoring it, which you can do free of charge, weekly, at AnnualCreditReport.com.
In my quest to improve my score—as of this writing, my FICO 8 has climbed into the Exceptional range with at least one of the bureaus!—I stumbled across a few not-so-obvious steps that might help you too. Be patient: It was three months before my scores started to budge.
1. Get On-Time Rent and Utility Payments Counted on Your Report.
You don’t have to wait till 2025 to do this; some special programs allow it now. For example, you can have payments for rent, cell phone, streaming services and utilities counted in your score by signing up free of charge with for Experian’s Boost.
This could improve your score by a few points, says NFCC’s McClary—possibly enough to tip your FICO score from the Good category (670 to 739) into the Very Good (740 to 799) or even Exceptional (starting at 800). Keep in mind: Experian says you must pay your bills electronically from your bank account or by credit card (not by, say, PayPal or Venmo) for the payments to count.
You can also sign up for TransUnion’s eCredable program for $25 per year to have payments for utility, cell phone, and cable services considered in your credit score. To get rental payments reported to Equifax, you’ll need to live in a property that participates in a program called Bilt Rewards, which covers about 2 million rental units. Download the Bilt app to sign up.
Good to know: Joining these programs involves some privacy trade-offs, because you need to grant access to your bank or other accounts.
And for Experian to include your rent payments, Experian says only certain property management companies or payment platforms qualify, and that you can check to see if yours is among them when you sign up for Boost. (I signed up with Experian, but because I lived in an Airbnb for about a year and paid for it via Venmo, my monthly rent and utility payments weren’t captured, though other payments, like for my cell phone, were, which added a point or two to my score.)
2. Pay Off Credit Cards With the Lowest Balances.
The conventional wisdom with credit card debt is that it’s best to first pay off cards with the highest interest rates. But because you’re aiming to improve your score as fast as possible—and because the scoring algorithms look less kindly on you when you have many accounts with balances, large or small—in this case it makes sense to zero out the balances on as many cards as you can, says McClary.
Meanwhile, continue paying off other loans—car, student, or personal—as usual. Such installment loans weigh less heavily on the credit score calculation than the revolving debt of a credit card does, according to Experian.
3. Pay Down Debt on Remaining Credit Cards So That You Are Using Less Than 30% of Available Credit.
Start with the card that has the greatest amount owed (again, not necessarily the card with the highest interest rate). Credit scoring algorithms consider the debit-to-credit ratios of each individual credit card account, as well as your overall total, according to Experian. So start with the card for which you owe the most, and pay it down to the point where you’re using only 30 percent of available credit, then move on to the next credit card. Doing so will improve your debt-to-credit ratio, which accounts for 30 percent of a FICO score.
Once you get each card below the 30 percent threshold, McClary says to consider getting each of them below 10 percent, or even down to zero, to improve your ratio further and your score. “Doing so is also great for your financial well-being.”
In my case, I had a single credit card I had basically maxed out. So I paid off the entire thing—almost $22,000—using money from an investment account. That lowered my debit-to-credit ratio from 90 percent to less than 50 and made it so I didn’t have a credit card with a balance. The two actions together added more than 40 points to my score.
4. Keep Old Credit Card Accounts Open, Even If You’re Not Using Them, for Now.
Again, this bucks conventional wisdom. But if you’re working to improve your credit score quickly, especially if your goal is to obtain a home loan, it’s smarter to keep these old accounts open until the loan is in hand. The scoring algorithm will factor in all that unused credit, which could help you get your total credit utilization under 30 percent, McClary says.
A secondary benefit is that keeping those accounts open gives you longer credit history, McClary says. Length of credit history represents 15 percent of your score.
5. Get a ‘Secured’ Credit Card That Reports Payments to the Credit Bureaus.
These are typically recommended for folks with a thin credit history who need to build it out. They’re great for that. But it might be worth getting one to raise your credit score by a few points even if you already have a conventional credit card or two, McClary says. Unlike traditional credit cards, secured cards do not extend credit to you but rather have you make a deposit (at least one we found was as little as $49) with the lender. You then use the card to make small purchases that don’t exceed the deposit. When the balance comes due, the lender releases your funds on account to pay it in full. As those on-time payments are reported, they can positively affect your payment history, which is 35 percent of your score.
Secured credit cards can also be helpful if you haven’t had a lot of recent activity on your credit report and would like to add additional positive payments, says Chuck Bell, a financial services program director at Consumer Reports.
Bank of America, Capital One, Citi, and Discover are among the companies that offer these. Also check with your local community lenders and credit unions for additional options, McClary says.
Pro Tips to Protect Your Score
The following actions won’t increase your credit score, but they can help you avoid inadvertently losing points while working to build it up.
Avoid applying for new loans or credit cards. Each time you apply for credit of any kind—even a credit card from your favorite store—the application process involves what’s called a “hard” check of your credit. Each check could cost you several points, or possibly more, on your score, McClary says.
To a creditor, “applying for more credit looks like you can’t handle your existing debts,” he says, which can make them unwilling to extend additional loans to you.
If you don’t have a balance, pay off new credit card charges as they appear periodically over the month, rather than at the end of the billing cycle. Most credit card companies offer what’s called a “grace period”—at least 21 days or so before payment is due and before interest gets charged. But don’t wait for the statement due date to arrive to pay what you owe, says Bill Hardekopf, CEO of BillSaver.com, which helps consumers lower their monthly bills and improve their credit scores. By then, the debts may have been reported to the credit bureaus.
Instead, skirt having these debts reported by immediately paying them when the charge shows up in your account, which could be just a day or two after you made the purchase. You can do this online, by phone, or through your credit card company’s app.
Good to know: This method only keeps new credit card debt off your credit report, but won’t affect existing card debt you already carry.
Shop for a mortgage within one 14-day period. That’s because FICO will roll up similar loan inquiries—and the hard checks that go with them—made within a 14-day period into a single inquiry that only dings you a few points, one time, according to FICO’s Gaskin. Keeping within this window could save you 5 points per hard inquiry—unlike my situation, where I had two hard bank inquiries made a month apart. Both cost me two points each, and they take two years before they’re removed. Ouch.
Not happy with an item on your credit report? Add a personal note. Add a brief note in your own words to each of your credit reports if there is, say, a late payment listed on them that was due to an extenuating circumstance, such as a death in the family. Although adding a note won’t help your credit score, McClary says, it could positively influence some lenders who might otherwise be on the fence about your application.
Editor’s Note: The video included in this article was made possible with the support of the Kapor Foundation, which works toward rebuilding a more equitable tech sector, economy, and society.
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