How to improve your credit to get a mortgage
If you've been paying down debt and your score isn't moving, you're probably paying the wrong things in the wrong order. Some of what people do to fix their credit actively damages it — and one common move can set you back years.
Keep utilization under
40%
On every card, not just overall
Possible score movement
20–40
Points, from utilization alone
Target score
750+
780 and above gets the best terms
What actually drives your score
- Payment history — the largest single factor. Do you pay on time?
- Credit utilization — how much of your available credit you're using
- Length of credit — how long you've had accounts open
- New credit — recent cards, a new car loan
- Credit mix — installment loans alongside revolving credit
Payment history matters most overall. But if you're trying to move a score quickly to qualify for a mortgage, utilization is the lever — it's the one that responds fastest.
Utilization, and the 40% line
Say you have a card with a $10,000 limit:
At 70% you still have $3,000 of available credit, but the bureaus read you as a heavy credit user. Getting below 40% can move a score 20 to 40 points on its own.
This is the change that shows up fastest. Nothing else you can do in a few months moves a score like utilization does.
One bad card ruins a good picture
Consider three cards:
| Limit | Balance | Utilization | |
|---|---|---|---|
| Card 1 | $5,000 | $4,500 | 90% |
| Card 2 | $8,000 | $1,000 | 12% |
| Card 3 | $2,000 | $0 | 0% |
| Overall | $15,000 | $5,500 | 37% |
Overall utilization is 37%, comfortably under the line. But that single card sitting at 90% is still hurting you.
The fix is spreading the balances so each individual card sits below 40%, rather than looking only at the total. Same debt, better score.
What to pay off first
Start with high-utilization cards. Whatever's sitting near its limit does the most damage, so it delivers the most improvement.
After that, two legitimate approaches:
Highest interest rate first. If one card is at 20% and another at 7%, clearing the 20% saves you the most money over time. Mathematically this is the better route.
Smallest balance first. Less efficient, but you see progress. Grinding away at a large balance with nothing visible happening is discouraging, and plenty of people give up. Knocking out a couple of small ones builds momentum.
Both work. Pick the one you'll actually stick with.
Whichever you choose — do not close the accounts once they're paid off.
Never pay an old charged-off account
Recent late payments are different from old ones, and the distinction matters enormously.
If you've recently gone late on an account, bring it current. Recent delinquency does real damage and fixing it helps.
If an account has been charged off or delinquent for five, six, seven years — leave it alone. Making a payment on it re-reports the account to the bureaus, effectively resetting its age, and can push your score down rather than up.
People pay old collections believing they're cleaning things up, and end up worse off than before they touched it.
This is the strongest argument for having a mortgage advisor pull your credit before you spend anything. They can see every trade line and tell you specifically which payments help and which do damage.
Sometimes the answer is to pay nothing at all until closing, and clear the accounts through escrow. That's a real strategy, and you'd never arrive at it on your own.
What not to pay off
Student loans. Generally lower interest with manageable payments and more flexibility built in. Clearing them rarely produces the score improvement people expect, and the money usually works harder elsewhere.
Your car loan. This one surprises people. An installment loan with years of on-time payments is actively helping your score. Pay it off and that positive trade line closes — which can lower your score rather than raise it.
Any credit card, in the sense of closing it. Pay the balance to zero, absolutely. But leaving the account open preserves both your available credit and your length of credit history. Closing it shrinks your total limit, which raises utilization on everything else.
Cut the card up. Take it out of your wallet, remove it from your phone. Just don't close the account.
Faster ways to move the number
Ask for credit limit increases. An $8,000 balance on a $10,000 limit is 80% utilization. Get the limit raised to $20,000 and the same balance is 40% — without paying anything. It also signals that a lender is willing to extend you more credit, which helps in itself.
Discipline required. A higher limit is not more money to spend.
Don't open new trade lines. If you're buying a home, financing furniture or a new car is close to the worst thing you can do. Both change your ratios and add new credit at exactly the wrong moment.
Make extra payments within the same month. An additional positive payment plus a lower reported balance. The effect is modest, but it compounds with everything else.
Get added as an authorized user on an old, clean account belonging to someone with strong credit. Their history transfers to you. My father did this for me when I was young, and I'll do the same for my kids — it's one of the most effective ways to establish credit from nothing.
Why the number matters so much on a mortgage
Your score doesn't just decide whether you're approved. It prices the loan.
A 650 and a 750 qualify for meaningfully different interest rates. Strong credit reads as lower risk, which gets you better terms across the board.
It compounds in a way people don't anticipate:
- A higher score can reduce mortgage insurance if you're putting less than 20% down
- A lower rate means a lower monthly payment
- A lower payment improves your debt-to-income ratio
- A better ratio means you qualify for more house
Twenty, forty, sixty points can be worth thousands of dollars over the life of the loan. See our guide to how much income you need to qualify for how the ratios work.
What counts as a good score
I meet people who tell me they have great credit at 650, and others apologising for a 750 they're still working on.
Aim above 750 for the best terms. Above 780 is excellent. The difference between 650 and 700 is real, and getting into the 700s should be the goal if it's within reach.
Credit and mortgage FAQ
What's the fastest way to improve your credit score for a mortgage?
Reducing credit utilization. Bringing a card from 70% of its limit down below 40% can move a score 20 to 40 points, and it responds faster than any other factor. Check each card individually rather than your overall figure — a single card at 90% damages your score even if your total utilization looks acceptable.
Should I pay off old collections before applying for a mortgage?
No. Making a payment on an account that has been charged off or delinquent for several years re-reports it to the credit bureaus, effectively resetting its age, and can lower your score. Recent late payments should be brought current, but old charge-offs are better left alone. Have a mortgage advisor review your trade lines before paying anything.
Does paying off a car loan hurt your credit?
It can. An installment loan with a long history of on-time payments contributes positively to your score, and paying it off closes that trade line. If your credit mix and payment history depend on it, the score may fall rather than rise. The same logic applies to closing credit cards, which reduces both available credit and length of history.
What credit utilization percentage should you aim for?
Below 40% on each individual card, not just across your accounts overall. On a $10,000 limit that means keeping the balance under $4,000. Someone with three cards can sit at 37% overall while one card at 90% is still doing damage, so spreading balances across cards can improve a score without paying down any debt.
Does asking for a credit limit increase help your score?
Yes, in two ways. An $8,000 balance on a $10,000 limit is 80% utilization; raising the limit to $20,000 makes the same balance 40% without paying anything down. It also signals that a lender is willing to extend more credit. The obvious caveat is that a higher limit isn't more money to spend.
What credit score do you need for the best mortgage rate?
Above 750 for the best terms, with 780 and above being excellent. The difference between 650 and 750 is meaningful in pricing. A stronger score can also reduce mortgage insurance when putting less than 20% down, and the resulting lower payment improves your debt-to-income ratio, which increases how much you can borrow.
Get your credit reviewed before you spend
Which accounts to pay, in what order, and which to leave alone depends entirely on what's actually on your report. A mortgage advisor can pull it, look at every trade line, and give you a specific plan — including whether to wait and clear things through escrow instead.
Happy to connect you with our mortgage advisor and build the plan around your timeline.