How to Improve a Poor Credit Score to Get a Home Loan

There is more to buying a house than having an acceptable credit score, but that's where many people start as they gauge their creditworthiness. Credit scores range from 300 to 850, according to Privacy Rights Clearinghouse, a nonprofit consumer information company. The agency reports that scores above 720 are excellent, with a 620 score often enough for standard mortgage approval. That doesn't mean people with lower scores are shut out of the housing market. In 2010, home loans insured by the Federal Housing Administration were available to people with credit scores as low as 500.

Instructions

1

Find out just how poor your credit score is by ordering your credit report and score through AnnualCreditReport.com (see Resources). Three major credit bureaus -- Experian, Equifax and TransUnion -- created the site to offer free reports as required by the Fair Credit Reporting Act. Follow the instructions included in your report to order your credit score separately, for a fee.

2

Compare your score to acceptable standards for buying a house. This will help you understand how much you must improve your credit score to qualify for a loan.

3

Review your credit report for problems that could be affecting your credit score, including excessive debt, late payments, errors and old credit card accounts assigned to debt collectors.

4

Make payments to bring all open accounts current. Pay down balances on credit cards and other revolving accounts. MSN Money reports that your balance on a revolving account should not exceed 30 percent of the credit line. Contact debt collectors to pay off delinquent debts, if necessary.

5

Pay your bills on time every month. That's one of the most important things you must do to improve your credit score, according to Privacy Rights Clearinghouse.

6

Order additional credit reports and scores as you monitor your progress. You're entitled to three free reports -- one from each of the credit bureaus -- every 12 months from AnnualCreditReport.com. However, you must pay for your credit score each time.