Whether you already own a home and are looking to buy a new one or find yourself ready to buy as a first-time homebuyer, improving your credit score in advance of homeownership is one of the first steps you should take towards getting the best average daily mortgage interest rate. Having a good credit score can unlock more flexibility when it comes to looking for a home, as you may qualify for a better interest rate or a higher amount.
There are several factors influencing your credit score, and some take time. However, if you’re about to start the homebuying process and want to improve your credit quickly, there could be some low-hanging fruit options to make that happen. This is particularly useful if you’re a few points away from a goal score, such as 700.
The average daily mortgage interest rate for Wednesday, January 17, 2024 is 6.88% for a 30 year fixed rate. The rate rose 0.11% from yesterday and 0.24% from December 2023. This information is sourced daily from correspondent, retail, and wholesale lenders located in the United States.
The average daily mortgage interest rate for Wednesday, January 17, 2024 is 6.15% for a 15 year fixed rate. The rate rose 0.15% from yesterday and is the same as they were in December 2023. This information is sourced daily from correspondent, retail, and wholesale lenders located in the United States.
What credit score should you aim for to buy a home?
While the best credit score is always a goal, your realistic goal should be to aim for a credit score that falls within the guidelines of the type of loan you’ll be applying for.
FHA loans, popular for first-time homebuyers, are administered by HUD. Each year, the requirements change. For 2024, if your credit score is 580 or above, you could qualify for a loan with a 3.5% down payment. However, if you have 10% down payment, you could qualify for an FHA loan with a credit score of 500.
If you qualify for a VA loan (for veterans and their families), your minimum credit score is likely 500. However, for both VA loans and FHA loans, a score of at least 620 is ideal.
Two fast credit score fixes
Once you get your official credit score report, look for blemishes or bad marks. If you dispute these, and they are indeed things you don’t owe or have already paid off, your score can go up immediately. You should dispute these marks directly with the issuing credit bureau.
Your credit usage can also impact your score. This means paying down debt quickly can impact your score. However, you could also raise limits on credit cards (without increasing usage) or qualify for 1-2 new cards with a high limit (use them minimally). This will demonstrate that you have a low credit usage. Keep usage under 30%.
Lastly, if you have legitimate debt showing up on your report, negotiate with the creditor and pay it down immediately. Some homebuyers find that they have small balances they didn’t know about on their credit report – these are easy to knock out to clean things up and raise your score.