Getting Your Credit in Shape to Get a Mortgage

Louisiana REALTORS® • July 11, 2024

Buying a home is one of the biggest financial commitments you will ever make. Getting a mortgage is a critical stage in this process, and getting a mortgage  with favorable terms depends in large part on your credit score. Lenders use your credit score to determine your creditworthiness, which affects the interest rates and terms of the loans they offer. Preparing your credit before applying for a mortgage can save you hundreds of dollars over the course of the loan.


Understanding Credit Scores

Your credit score is a numerical representation of your creditworthiness, typically ranging from 300 to 850. The higher your score, the better your creditworthiness in the eyes of lenders. Credit scores are calculated based on several factors:


  • Payment History (35%): Your record of on-time payments.
  • Credit Utilization (30%): The amount of credit you're using compared to your credit limits.
  • Length of Credit History (15%): The average age of your credit accounts.
  • Credit Mix (10%): The variety of credit types you have, such as credit cards, loans, and mortgages.
  • New Credit (10%): The number of recent credit inquiries and newly opened accounts.


Steps to Improve Your Credit Score

Review Your Credit Reports

Equifax, Experian, and TransUnion are the three main credit bureaus. Start by acquiring your credit reports from each. Every bureau is required to provide you with a free report once a year at AnnualCreditReport.com. Carefully check these reports for mistakes, such as inaccurate account information or fraudulent activity, and raise any discrepancies that you find.

 

Make Payments On Time

Your credit score is mostly influenced by the payment history you have provided. It's important to always pay your payments on time. For peace of mind, set up automated payments or reminders so you never forget a deadline. Your credit score can be severely impacted by even one late payment.

 

Cut Down on Credit Usage

The ratio of your outstanding credit card balances to your credit limits is known as credit usage. To raise your score, try to keep your utilization below 30%. Reduce your balances or ask for an increase in your credit limit, if at all possible (but avoid piling on extra debt).


Don't Create New Credit Accounts

Opening new credit accounts to increase your available credit may seem appealing, but doing so will temporarily drop your score because of hard queries and a decline in the average age of existing accounts. Create new accounts only when it is absolutely required.

 

Keep Your Old Credit Accounts Open

Keep older accounts open even if you don't use them much since your credit history matters. Your credit score may suffer if you close old accounts because doing so can decrease your credit history and lower your total amount of available credit.


Mix Up Your Credit

A variety of credit kinds, such as retail accounts, installment loans, and credit cards, can all help raise your score. However, only take on additional credit types if you can responsibly manage the payments and it makes sense for your financial condition.

 

Reduce Debt Wisely

Prioritize paying off high-interest debt in order to save money on interest and expedite the reduction of your total debt. To speed up your debt repayment, think about applying the avalanche or snowball methods, which pay off high-interest debt first and smaller balances last, respectively.


Keep an Eye on Your Credit

Use credit monitoring services to keep an eye on your credit record and score. Frequent monitoring keeps you updated on any changes to your credit score and warns you of any unusual activity that might have an impact on it.


Timing Your Mortgage Application

Work on raising your credit score well in advance of when you intend to apply for a mortgage, as it takes time. Try to start half a year or more in advance. You have this window of time to make adjustments and observe how they improve your credit score.

 

It's crucial to improve your credit before applying for a mortgage in order to get the best potential loan conditions. You can raise your creditworthiness and chances of acceptance by being aware of the elements that affect your credit score and taking proactive measures to raise it. Your REALTOR® and your lender can also provide helpful ways to make sure that your credit is in a place to get you the most favorable terms for your mortgage. 

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Week 10 brought meaningful movement on several Louisiana REALTORS® priorities affecting real estate, property rights and insurance. And Week 11 is shaping up to be one of the most important stretches of the session. The biggest developments last week were the final Senate passage of HB 468 by Rep. Troy Hebert with amendments, movement of HB 1027 by Rep. Hebert to the Governor for executive approval, continued Senate progress on HB 1187 and HB 1166 , and final legislative action on SB 180 . REALTOR® Day at the Capitol also came at an important time, giving members the opportunity to reinforce industry priorities with legislators as several key bills neared final passage or awaited committee, concurrence or floor action. Just as importantly, the Louisiana REALTORS® legislative package has now cleared most of its major hurdles, and barring any late-session surprises, the remaining package’s bills should be headed to the Governor’s desk shortly. On the core real estate package, HB 468 , the wholesale regulation bill, remains the most immediate priority. The Senate passed the bill 34-0 on May 12 with amendments, and it now returns to the House for concurrence. That places it in a fast-moving posture, and members should be prepared for quick House action once concurrence is called. HB 1027 , the appraiser liability bill, has now moved into final executive posture after passing the Senate 35-0 without amendments and being sent to the Governor. Together, those two bills represent major wins for consumer protection, market integrity and greater certainty in the real estate transaction process. Insurance remains one of the busiest and most important policy areas as we head into Week 11. HB 1187 , dealing with Louisiana Citizens for emergency assessments, was reported favorably by the Senate Insurance Committee and is now pending Legislative Bureau for review in the Senate. HB 759 , addressing fortified roof endorsement offers, remains one of the more important insurance and mitigation bills still in play and is positioned for Senate floor action. HB 408 , which would prohibit insurers from non-renewing residential policies when homeowners timely mitigate risks, remains pending in House Insurance, as does HB 1210 , which would create a mandatory pre-suit claim review process for residential property insurance. Additional insurance measures, including HB 850 on Standard Fire Policy cancellation notices, HB 1162 on contractor verification in insurance claims, and SB 241 on adjuster and appraiser license-number disclosure, also remain active. These bills continue to matter because insurance affordability, mitigation, claims handling and policy stability remain central to property ownership and transaction viability across Louisiana. On disclosure and regulatory matters, HB 1166 by Rep. Kim Carver , requiring disclosures for vacant residential property and carrying out the adopted LREC reform amendment, was reported favorably by the Senate Commerce Committee and is now pending with the Legislative Bureau for review in the Senate. That keeps the bill in a strong position for Senate floor movement and makes it one of the key bills to watch in Week 11. SB 180 , allowing a surviving spouse of a deceased disabled veteran to transfer an expanded property tax exemption under certain circumstances, has completed legislative action and is now in final processing. Week 10 and the run into Week 11 also reflected an important defensive win for Louisiana REALTORS®. Our team successfully worked to block and tackle HB 617 and HB 750 to ensure real estate and nonprofit activity were not swept into overly broad consumer protection frameworks. On HB 617 , Louisiana REALTORS® opposed the bill as drafted and worked to posture it so that real estate professionals would not be caught up in a fee-disclosure framework that does not fit the realities of real estate transactions. On HB 750 , we worked to ensure the bill would not be interpreted to reach real estate or nonprofit operations in a way that could create unintended compliance burdens for leases, property management arrangements, association activity, or recurring charges authorized under those structures. That effort helped keep broad subscription-style language from bleeding into housing and nonprofit operations where it plainly does not belong. Civil justice and broader property rights measures also remain active entering Week 11. HB 437 , dealing with expert witness fees, and HB 1089 , creating CARE Accounts for certain damages arising from delictual actions, remain pending in Senate Judiciary A and remain high-priority tort reform measures to watch. HB 472, the rent stabilization bill, remains involuntarily deferred and stays on the watch list for any attempted revival through another vehicle or amendment. Additional redevelopment and tax-related measures, such as HB 214 and HB 217, also remain relevant to the broader conversation on blight, reinvestment and neighborhood stabilization. A few additional housing and valuation bills are also worth noting HB 292 on security deposits, HB 297 on early lease termination in stalking and cyberstalking situations, and HB 300 on appraisal thresholds for bank-owned property have all advanced and remain part of the broader housing policy landscape. The practical takeaway is straightforward: Week 11 will likely move fast, and late-session maneuvering can matter as much as headline floor votes. Louisiana REALTORS® should be prepared for House concurrence on HB 468 , further Senate movement on HB 1166 and HB 1187 , continued action on insurance and tort reform, and the possibility of late amendments or procedural pivots on bills affecting real estate transactions, private property rights, housing affordability, nonprofits, property managers and the broader real estate industry. The package is in strong shape, but this is the point in the session when the finish line comes into view and traffic gets thick. Please view the weekly bill tracking report provided by our lobbying team over at Harris, DeVille and Associates. 
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