While a good credit rating is typically something you establish over time, if you want to buy a house within a year and are trying to get your credit in good shape, there are some financial shortcuts that can help.
Before you can build credit, you've got to establish credit. Apply for a low-interest credit card, personal line of credit at your bank, or even get a low-interest department store credit card. Use them and pay off all or the majority of the balance every month. This will help you start establishing a track record for managing credit smartly and responsibly.
Make Payments on Time
Never miss a payment -- ever. Set up automatic payments if you need to, and schedule the payment a few days before it’s actually due to make sure it’s covered. Even one or two late payments can ding your credit, and lenders want to see a near flawless record in the year leading up to a mortgage application.
Reduce Debt-to-Income Ratio
While you want to establish credit and use it to build your credit rating, you don't want to overdo it to a point where you skew your debt-to-income ratio. When you apply for a mortgage, the lender will look at how much debt you already carry, so be prepared to pay off or pay down debt as part of the mortgage qualifying process.
Repair Inaccurate Credit Reporting
Monitor your credit during the year leading up to your house purchase to make sure there aren’t any surprises when the lender pulls your credit report. If you see a mistake, address it and get it removed before you apply for a home loan to ensure you get the best rate and terms possible. Contact the creditor as soon as you see a mistake to ensure it is corrected.
Make it a Team Effort
If you’re applying for a home loan with a spouse or significant other, and both of your names will be on the mortgage, both of your credit reports need to be stellar. If your partner has so-so credit that can’t be fixed within a year, you might be better off getting the mortgage in your name alone. You can then quit-claim your partner’s name on to the mortgage after closing.
Save Some Cash
The more cash you have socked away, the better your ability to qualify for a mortgage. If you have a nest egg set aside, you can use it as a down payment or to pay off revolving debt to make your credit look better.
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