To address personal credit issues before applying for a home loan, first review and dispute inaccuracies on credit reports through . Pay down credit card balances to reduce utilization ratios below 30%, as high utilization can lower credit scores. Timely payment of all bills, including utilities and medical debts, is critical. If scores remain below 620, consider a secured credit card or credit counseling. refinancing existing loans or consolidating high-interest debt may also improve creditworthiness. Lenders typically require a minimum score of 620-640 for conventional loans, while FHA loans accept lower scores with mortgage insurance.

Credit repair directly impacts loan approval and interest rates. According to the Consumer Financial Protection Bureau (CFPB), approximately 20% of consumers discovered errors on their credit reports in 2022, which can lower scores by up to 100 points if unresolved. A FICO score below 580 often results in loan denials or high-interest subprime mortgages, according to Experian. Reducing credit utilization by 10% can raise scores by 20-30 points within six months, as noted by the Federal Reserve. For example, a person with a $5,000 limit card carrying a $4,000 balance (80% utilization) reducing it to $1,500 (30%) can significantly improve their score. Additionally, timely payments account for 35% of a FICO score, making consistent bill payment essential. Lenders like Fannie Mae and Freddie Mac prioritize borrowers with scores above 620 for conforming loans, while FHA requires 500+ with mortgage insurance. Proactively resolving credit issues can save thousands in interest costs over a 30-year mortgage.