If you’re thinking about buying a house in the next few years, you might want to work on improving your credit score.

The Federal Reserve reports that 90% of U.S. mortgages taken out in the first quarter of 2019 were by home buyers with a score of at least 650, and 75% had a score higher than 700.

The median credit score for mortgages taken out this year sits at 759, the report found, and only 10% of mortgage borrowers had credit scores under 647.

FICO credit scores range from 300 to 850, and the national average is 704. Any score between 700 and 749 is typically deemed “good,” while scores from 650 to 700 are “fair.” Excellent scores are usually those over 750.

While you can likely qualify for a home loan with a rate lower than the median, a higher credit score typically means better interest rates and loan options. A multitude of other factors can also influence the mortgage-approval process, including the cost of the home, the size of the down payment and your income.

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How to improve your credit score

If you’re interested in buying a home in the future, there are easy ways to increase your credit score and improve your chances of getting a mortgage at a good interest rate.

First of all, pay all of your bills on time and in full. Payment history makes up 35% of your FICO score, which is the most commonly used measure of creditworthiness. Setting your bills on auto-pay and keeping tabs on your payment due date for each account will help ensure that you routinely make on-time payments.

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Next, pay attention to your credit utilization rate, which comprises 30% of your score. Experts recommend keeping it at 30% or less month to month. Credit utilization refers to the percentage of your total available credit that you are using at one time. If your credit card has a limit of $10,000 and you have a balance of $2,000, your credit utilization rate is 20%, for example.

“There are two keys to every credit score and having a good score: You have to pay your bills on time every single time, and you have to keep balances as low as possible,” Rod Griffin, Experian’s director of consumer education and awareness, previously told CNBC Make It.

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Other ways to improve your score include keeping your oldest credit accounts open and making sure you’re not over-applying for new lines of credit. The length of your credit history makes up 15% of your score, while the mix of credit accounts you have and the number of new credit inquiries you’ve recently made each comprise 10% of your score.

It’s also smart to keep an eye on where you stand. You are allowed one free credit report per year from Equifax, Experian and TransUnion, the three major U.S. credit bureaus, which can be accessed online at AnnualCreditReport.com or by using a product like Credit Karma. Some banks, including Chase, also offer free credit score services. Pulling your report will not have a negative impact on your score.

Remember, raising your credit score won’t happen overnight. Paying your bills on time and lowering credit usage are long-term habits that need to be built and cultivated. To improve your score, patience is key.

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©CNBC is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of USA TODAY.



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