Buying a home in 2024? There are three credit moves you should make and three you should avoid.

I don’t know about you, but I’m preparing to buy a house in 2024. It’s taken me almost two years of various personal finance activities (including paying off debt and saving money) to get to this point, but I’m finally almost ready.

If you’re like me, you’ve probably been waiting a long time and want to make sure your credit mistakes don’t prevent you from getting a mortgage. And interest rates aren’t very competitive these days. As of this writing, the average interest rate for a 30-year mortgage loan is 6.61%, according to Freddie Mac. So the higher your credit score, the better your chances of getting the lowest interest rate.

So, here’s a list of credit do’s and don’ts to help you apply for mortgage pre-approval and find the right lender and home loan for you.

Do this…

Here are some credit-related things you should do before showing your finances to a mortgage lender:

1. Keep your payments up to date

Ideally, you pay your creditors on time every time, but if you’ve been a bit negligent about this in the past, it may reflect on your credit score. So right now, before you reveal your finances to your mortgage lender, resolve to make all your payments to your credit cards and lenders by the due date. Your payment history is the biggest part of who you are. FICO® Score (35%), so this move is very important if you want to show lenders the best possible credit score.

2. Pay off your debt

If you want to work on your credit score before applying to a lender for a mortgage pre-approval, consider paying off some of your existing debt, if possible. This is a good idea for two reasons. First, you can get a huge loan commitment (mortgage) while reducing the amount you already owe. In times like these, wouldn’t it be good to be less stressed about monthly rent?

Second, paying off debt has a positive effect on your credit score. I recently paid off all my existing debt, and my credit rating went up by 100 points. The amount you owe your creditors is 30% of your FICO® score, so if you can reduce your existing debt, you will definitely see some improvement.

3. Check your credit report

Finally, you can go to AnnualCreditReport.com to access your credit reports from the three major consumer credit bureaus. Your goal is to ensure accuracy. If you find an error (such as a delinquent account that doesn’t actually belong to you), you can dispute it with the credit bureaus to have it removed, possibly increasing your credit score in the process.

… not that

Now that you know what to do, here’s what to do: ~ no To do.

1. Open a new account

A new credit card with a nice sign-up bonus sounds pretty good before you buy a home, right? Yes that’s right. However, you will want your credit score to be good because your mortgage lender will be conducting a credit check. A new credit check will drop your credit by a few points, and if you’re moving between two credit score ranges, a new credit card may make it difficult to get the best mortgage rate possible.

2. Make a big purchase

Although the prospect of furnishing a new home is exciting, now is not the time to buy a new sofa or a second refrigerator that you can purchase on credit. Mortgage lenders want to make sure you are responsible with their credit, and making a large purchase before taking financial responsibility for a home is a bad move. Plus, on top of dealing with how much money will go into down payment, closing costs, and moving costs, do you really want to take on more debt right now?

3. Closing credit accounts

While you’re combing through your personal finances before applying to a mortgage lender, you may be tempted to downsize your credit cards. Unless you have a compelling reason to close your credit card accounts right before you start mortgage shopping (e.g. annual fees for cards you don’t use, etc.), resist the urge. If you’re losing an account you’ve been using for a long time or one with a high credit limit, it’s best to avoid this action. You may lose some of your credit score in the process. Closing an account will affect both the length of your credit history and your credit utilization (if you carry balances on other cards).

Simply put, if you’re buying a home in 2024, now is the time to avoid credit problems. Make sure your credit report is accurate, maintain on-time payments, and hold off on closing old accounts or opening new ones until the problem is resolved and your mortgage loan is closed.