Limited credit history could be preventing mortgage qualification

Dear Experian,

I am trying to buy a house, and my credit score just needs to go up by one point. The only credit I have is a credit card with a $900 balance and $1,500 limit. If I pay it down to $500 would this raise my score?



Dear NDR,

Because credit scores consider everything in your credit history, it is impossible to say with any certainty if reducing your balances definitely would result in an increase in your credit score.

The best way to find out what you need to do is to get the risk factor statements that describe what from your personal credit report most affected that score. If your lender cannot provide those factors, you can get a score and factors from many other sources, including Experian.

While the numbers may be different, the risk factors tend to be very consistent from one score to another. By addressing the risk factors you receive, all of your credit scores will get better.

Those factors will tell you what you need to focus on in your personal credit history to improve your credit history and, therefore, the score.

Paying down balances is often the only change you can make quickly in your credit accounts to improve your risk position. However, any change you make might not result instantly in an increase. In fact, a change might result in a temporary decrease in the score.

Time is the key. Credit scores don’t only look at what the payment status or account balance is at the moment. They look at your payment history over time. A pattern of positive payment history, low balances, and other indicators of responsible credit use is necessary to have strong credit scores.

The other thing to consider is why your credit score is marginal. I often hear similar questions from people, but they omit the fact that they have late payments, charged off accounts, collection accounts or other serious credit management issues.

In those instances, I strongly encourage them to reconsider purchasing a home. Even if they were able to bump their scores just enough to qualify, that dream home could quickly become a nightmare because they aren’t in a position to handle additional new debt, particularly a very large debt. Before buying a home, I recommend they keep saving to build up a bigger down payment and a cash cushion for emergencies.

My guess, based on your question, is that a big part of your issue may be that you simply have a very limited credit history, which isn’t quite deep enough to be certain that you are a good credit risk.

Thanks for asking.

- The “Ask Experian” team

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