Getting your credit ready for a mortgage or car loan
Start early, keep recent history clean, lower your balances, and know which promises are red flags.
General information, not legal or financial advice. Disputes correct errors; accurate negative information generally stays on a report until its reporting period ends. No result is promised. Check the official sources and your state's rules for your situation.
Start months before you shop
Disputes and rebuilding take time. Each dispute round usually takes about 30 days for the investigation, plus mail time. Starting several months early gives you room to fix errors and build positive history.
- Check all three reports at AnnualCreditReport.com.
- Dispute real errors early, so the results show up before a lender checks your credit.
Recent history matters most
Lenders look closely at the last 12 to 24 months. A new late payment during that time can hurt more than an old one.
- Pay every open account on time. Automatic minimum payments can help.
- If you have little active credit, a secured card that you use lightly and pay on time can help build history.
Keep balances low
- A common guideline is to use less than 30% of each card's limit. Lower is better.
- If you can, pay down balances before the statement date, since that balance is often the one reported.
- Avoid opening or closing lots of accounts right before you apply.
How lenders look at you
- A co-borrower does not cancel out your credit. Lenders evaluate each borrower, and many programs use the lower of the borrowers' middle scores.
- Many mortgage lenders still use older score versions, so a lender's score may differ from a free score you see online. Ask which score your lender uses.
- Waiting periods after a bankruptcy, foreclosure, or short sale differ by loan program. Ask the lender about the program you want.
Red flags
- Anyone who promises loan approval or a specific score.
- Anyone who says they can delete negative information that is correct.
- Anyone who tells you to use a CPN (credit privacy number) or create a new credit identity. Using one to apply for credit can be illegal.
- Credit repair businesses that charge before the work is done. The Credit Repair Organizations Act bans those upfront fees.
Letters that can help
- Dispute errors with a bureau
- Dispute a hard inquiry you did not authorize
- Ask a bureau to add or update accounts in your file
- Ask a creditor for a goodwill update on a single late payment