An acceptable credit score is one of the keys to getting your home loan application approved. Mortgage lenders have historically used FICO® scores—derived from data collected by one or more of the three major credit bureaus—as a major factor in determining whether you qualify for a mortgage. Different mortgage lenders can approve or deny loans based on their own risk tolerance, but anything below a “good” range may significantly decrease your odds of loan approval—and of a favorable interest rate if you are approved. So, what online tools are out there to help you improve credit and your odds of a shiny new mortgage? Let’s review a few.
Annual Credit Report
It’s hard to improve credit if you don’t know what you’re working with, so first things first: head to AnnualCreditReport.com and request a free yearly credit report from each credit bureau. (Credit reporting companies are mandated by Federal law to provide you with a free copy of your credit report every 12 months.) These reports contain the raw data that determines your FICO® score, which includes information on your loans and lines of credit, your track record at making payments, and potentially other financial information that lenders might find pertinent (such as a past bankruptcy).
The reason you’ll want a report from each bureau is because the information they possess about you may vary, which means that one bureau might have a negative item on your record whereas another might not. If you see a negative item on any of your credit reports that you believe to be in error (e.g. a fraudulent account opened under your name), be sure to dispute it right away. Scrubbing negative flags from your reports is one of the easiest ways to quickly improve credit.
Credit Monitoring & Protection Services
Several companies offer online credit monitoring services, which can range from simply providing FICO® score updates (like Credit Karma or NerdWallet) to more robust services that protect against credit fraud and identity theft (like Identity Guard or LifeLock). These can help you improve credit by keeping your finger on the pulse of what’s happening with your credit in real time.
Some of these services may be offered as a complimentary benefit by your bank or credit union, credit card company or even employer, so check in those places first. Other companies offer such services at no monetary cost, but be aware that they may use your data for their own purposes, such as showing you tailored ads that could earn the company commission if you purchase a product.
Online Bill Pay Services
Your bank or credit union likely offers an online bill pay service, and there’s a good chance it’s a complimentary benefit. This allows you to schedule, pay and track recurring bills from one convenient online location. If you set it up properly, online bill pay can effectively maintain or improve credit by helping to ensure that you don’t make late payments, which could negatively impact your credit report.
Online Budget Trackers
A carefully managed budget is an excellent way to improve credit, and today there are a wealth of online tools to help you stay on top of your finances wherever you go. Track bills and lines of credit, set savings goals and more—all from your laptop or smartphone. Like shopping for a car, you’ll want to pick a product that matches your personality and budget needs. Check out 8 Best Budgeting Apps to Download in 2019 for a good overview of different options.
Freezing Your Credit Online
If you don’t plan on applying for any loans in the near future, you can place a freeze on your credit, which prevents any business or individual (including yourself) from gaining access to your credit reports. This doesn’t improve credit but will help protect against identity theft and fraud, which can not only damage your credit score but take years to recover from. A freeze can be lifted whenever you choose, which you’ll have to do before applying for mortgage loans.
Think your credit’s in the right shape to qualify for a home loan? Talk with a licensed professional at our affiliate lender, HomeAmerican Mortgage Corporation!