Integrity

Credit scores are three-digit numbers that reflect how likely you are to repay your debts on time. Mortgage lenders rely on these scores to determine whether to approve your application and what interest rate to offer. Scores generally range from 300 to 850; the higher your score, the better your chances of qualifying for a competitive rate.

Several factors influence your credit score. Payment history is the most important component—roughly 35 percent of your score—so paying bills on time is critical. Your credit utilization ratio, which compares your credit card balances to the limits, accounts for about 30 percent. Using less than 30 percent of your available credit is recommended. The length of your credit history (about 15 percent) rewards borrowers who have established accounts over many years. The types of credit you have (about 10 percent) also play a role, with a mix of revolving and installment accounts viewed favorably, as do new credit inquiries (about 10 percent).

Here are some practical steps to improve or maintain a healthy credit score: set reminders to pay all accounts by their due dates; keep credit card balances low relative to your limits; avoid opening multiple new credit accounts in a short period; and review your credit reports regularly to correct any errors. Maintaining a diverse mix of credit—such as a credit card, auto loan, and student loan—can also help.

Taking these steps can boost your credit score and strengthen your mortgage application. A higher score not only makes approval more likely but can also save you thousands over the life of your loan by qualifying you for lower interest rates.