When you're looking to buy a house, your credit score plays a crucial role in determining the mortgage rate you'll be able to secure. The higher your credit score, the lower the interest rate you'll be able to receive, which can save you tens of thousands of dollars over the life of your loan. But what if your credit score is less than ideal? Don't worry – there are steps you can take to improve your credit score and secure a better mortgage rate. Here are some tips to get you started.

1. Check your credit report for errors

Before you can begin improving your credit score, you need to know what your current score is and what's affecting it. Start by requesting a free credit report from each of the three major credit reporting agencies. Review each report thoroughly to ensure that all the information is accurate. If you spot any errors, such as a debt that's been paid off but is still showing as outstanding, dispute the error with the credit bureau that's reporting it.

2. Pay your bills on time

One of the most important factors in determining your credit score is your payment history. Late payments can have a significant negative impact on your score, so it's crucial to pay all your bills on time. Set up automatic payments or reminders to ensure you never miss a due date. If you're struggling to make your payments, reach out to your creditors to see if they can offer any assistance or hardship programs.

3. Keep your credit utilization low

Your credit utilization ratio is the amount of credit you're using compared to the amount you have available. For example, if you have a credit card with a $10,000 limit and you've charged $5,000, your utilization ratio is 50%. A high utilization ratio can signal to lenders that you may be overextended and unable to repay your debts. Aim to keep your utilization ratio below 30% to maintain a healthy credit score.

4. Don't close old credit accounts

Closing old credit accounts can actually hurt your credit score, as it can reduce the amount of credit you have available and increase your utilization ratio. Instead, keep your oldest accounts open and use them occasionally to keep them active.

5. Consider a secured credit card

If you're unable to qualify for a traditional credit card, a secured credit card can be a good alternative. With a secured card, you'll need to make a deposit that serves as collateral, which can help you establish a credit history or improve your credit score. Just be sure to choose a secured card with reasonable fees and interest rates, and make your payments on time to see the greatest benefit to your credit score.

6. Avoid opening too many new accounts at once

Every time you apply for credit, whether it's a credit card, auto loan, or mortgage, it can have a temporary negative impact on your credit score. This is because each application triggers a hard inquiry, which can signal to lenders that you're in financial distress. To avoid a negative impact, avoid opening too many new accounts at once. Instead, space out your applications over several months to minimize the impact on your score.

7. Consider a credit-builder loan

A credit-builder loan is a type of loan designed to help people establish or improve their credit score. With a credit-builder loan, you'll borrow a small amount of money, typically between $500 and $1,500, which is deposited into a savings account. You'll then make regular payments on the loan over a set period, typically 6 to 24 months, until the loan is paid off. The lender reports your payment history to the credit bureaus, which can help you establish a positive credit history and improve your score over time.

8. Work with a credit counselor

In conclusion, improving your credit score is essential if you want to secure a better mortgage rate. By checking your credit report for errors, paying your bills on time, keeping your credit utilization low, and avoiding opening too many new accounts at once, you can improve your credit score and save thousands of dollars over the life of your mortgage. And if you're struggling to manage your debts or improve your score, consider working with a credit counselor who can help you develop a plan to achieve your financial goals.