One of the most important factors in obtaining a home loan is having a good credit score.

Your credit score is a number between 300 - 850, and the higher your credit score is, the better you look to lenders! Whether you want to buy a car, get a mortgage loan, or make payments on any large purchase, your credit score helps the lender evaluate your creditworthiness. Simply put, the lender wants to know what risk is involved in lending you money.

While 850 may be considered the perfect credit score, don't be alarmed if you don't have a perfect score. The fact is: most people don't!

A higher credit score can benefit you in many different areas of your life. Here are a just a few potential advantages that you may not have even considered yet:

  • Lower interest rates on loans
  • Higher credit limits on credit cards
  • Easier to rent a house, apartment or vacation rental
  • Lower security deposits or reduced fees
  • Better rates on car insurance
  • Lower rates on car leases
  • Better cell phone contracts
  • Better chance of getting a business loan
  • Past credit problems fade away with time
  • Easier to get approval for a mortgage loan

On top of these benefits, improving your credit score now could help you qualify for the home loan you want in the future. And it may also help you secure a lower interest rate, which could save you thousands of dollars over the life of your home loan.

To get started, we’ve prepared 6 tips to building healthy credit.

  1. Pay Your Bills on Time. Did you know? Late payments on your credit report can cost you up to 110 points on your credit score. Ninety-six percent of the people with top credit scores have no late payments on their credit reports. Paying your bills on time is a good habit to have when it comes to improving your credit scores! If you need help in this area, set up a spreadsheet or even a handwritten monthly checklist, so you can see all your current bills and their due dates. You can also set reminders in your calendar or cell phone, or schedule automatic payments to stay on top of it. Do whatever it takes to program yourself into a regular pattern of paying bills on time. Your credit card payments are generally due on the same day each month. So, if your current due date puts you in a money crunch, call your credit card company and ask them to change your due date, so it doesn't coincide with other large payments you have to make (such as your rent or car payment). That way, you can regulate your cash flow and avoid relying on credit cards for random spending in between paychecks!
  2. Create Conservative Spending Habits. Never max out your credit cards! People with high credit scores use only 30% or less of their available credit, and those with scores over 800 are using 10% or less. According to a recent survey by Fair Isaac Corporation (the creators of the FICO® Score), people with top level credit scores have an average of four credit cards with balances. So, using your credit cards does help you to build a solid credit history, but it's important to maintain conservative spending habits and keep your balance owed as low as possible.
  3. Don't Cut Up Old Credit Cards. If you have a stagnant credit card with a zero balance, make a small purchase and pay it off quickly. Or, use the old card to make automatic payments on a regular monthly expense, such as a utility bill. This doesn't change your monthly budget, it only changes who you're paying the money to. This can raise the credit history portion of your scores, based on how long you've had the credit card!
  4. Pay More Than the Minimum Payment. If you only pay the minimum payment on your credit cards, then you're paying just a little more than the monthly interest fees. Set a realistic goal for yourself. If you can pay double or triple the monthly payment for the next six months, then you're starting to chip away at that larger balance. But, at the same time, don't revert to using the credit cards again to make it through your monthly living expenses.
  5. Have a Limited Number of Credit Inquiries. Remember, too many credit inquiries in a short period of time can have a damaging effect on your credit score. So, don't apply for every credit card that is offered to you in the mail or at the mall. Too many recent inquiries from applications for revolving accounts in the last 12 months represent a greater risk when it comes time to apply for your mortgage.
  6. Ensure Your Credit Reports are Accurate. Last, but definitely not least, go through your credit reports carefully (you should have one each from Experian, Equifax and TransUnion) and look for errors.
  • Make sure the items listed on your card are yours. If you find charges you didn't make, you may be a victim of identity theft, or someone else's data is being reported to the wrong file.
  • Make sure "on time" payments are not listed as "late".
  • Make sure any collections that you've paid off have been removed.
  • Make sure all creditors you are faithfully making payments to are being recorded.
  • Look for negative comments that are older than seven years. You can ask to have these removed.
  • Look for bankruptcies older than 10 years, or accounts associated with the bankruptcy that are still showing up. You can ask to have these removed.

By examining your credit reports in advance, you can determine if it's in your best interest to create an action plan to improve your credit score. Make sure you get copies of all three credit reports (one each from Experian, Equifax and TransUnion) from a secure and reliable source, such as

When it comes to applying for a home loan, a high credit score is one of your greatest assets. After you've completed your loan application, the mortgage lender requests a copy of your credit report. This detailed report gives the lender a clear idea of how well you manage your credit.

The key is, if your average credit score is below 640, you will likely want to improve your scores before you shop for a mortgage. While your credit score has a tremendous effect on your ability to get the mortgage loan you want, there are many other factors involved in the loan approval process. The amount of your down payment, employment status, debt-to-income ratio, savings on hand for closing costs, etc. all come into play.

Talk to one of our knowledgeable mortgage bankers to discover the best mortgage to meet your short- and long-term goals. They will help you design a mortgage strategy that enables you to build financial security through home ownership.


While we offer this link for your convenience, please note that we are not responsible for the content provided by third-party websites. We encourage you to review the policies of any website prior to sharing personal information to ensure privacy and security. Any products or services accessed through this link are not provided by, endorsed or guaranteed by Plains Commerce Bank.

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