Improving your credit could be one of the savviest moves you’ll make as a home seller.
- If you’re selling a home, you may need a mortgage to buy another one.
- The higher your credit score is, the more likely you’ll be to obtain mortgage approval and snag an affordable mortgage rate.
You may have heard that we’re currently in a seller’s market, and that’s an accurate statement. Home values have soared on a national scale, and if you sell your home today, you might command a higher price than usual. Plus, housing inventory is still low and mortgage rates are still competitive. That means buyers may be clamoring for homes, and you might get a quick offer if you list yours.
If you’re going to sell your home, there’s a checklist of items you’ll need to tackle first. Those items include finding the right real estate agent to team up with and making minor home repairs to avoid turning potential buyers off. But there’s another key move worth making if you’ll be selling your home: boosting your credit score.
Why a higher credit score is key when selling your home
Once you sell your home, you’ll need someplace else to live. If you’re selling and downsizing, you may have enough money from the sale of your home to avoid having to take out another mortgage.
But if you’re buying a similar home or a larger one after selling, you’ll probably need to borrow money to finance it. And the higher your credit score at the time of your mortgage application, the more likely you’ll be to get approved. Furthermore, a higher credit score could be your ticket to a lower mortgage rate when you apply for a home loan.
How to boost your credit score quickly
If your credit score needs some work, there are several ways to boost it in a relatively short period of time. First, check your credit report for errors. If there’s a mistake that’s working against you, like a delinquent debt that was never yours to begin with, then getting it corrected could give your score a nice bump.
Next, try paying off some of your existing credit card debt. Doing so will lower your credit utilization ratio, which is a key factor in calculating your credit score.
You can also try getting added as an authorized user on a long-standing credit card. Doing so could help make up for a shorter credit history, which could also have a negative impact on your score.
What credit score do you need to get a mortgage?
The good news is that you can get approved for a conventional mortgage with a credit score as low as 620. But while that may be the minimum score required for a conventional home loan, some lenders might impose higher standards.
Furthermore, while you can get a mortgage with a credit score of 620, you may not get a great interest rate on your home loan with that number. It pays to do what you can to raise your score. In fact, if you really want to snag the best rates available, you’ll generally need to get your score up to the mid- to high-700s.
If you’re gearing up to sell your home and your credit score isn’t great, you may want to hold off and give yourself a little time to boost it. These days, homes are selling quickly. The last thing you want is to get stuck in a situation where you have a buyer but can’t purchase a replacement home because you won’t qualify for a new mortgage.
A historic opportunity to potentially save thousands on your mortgage
Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase.
The Ascent’s in-house mortgages expert recommends this company to find a low rate – and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn’t influence our opinions of products, we do receive compensation from partners whose offers appear here. We’re on your side, always. See The Ascent’s full advertiser disclosure here.