US home prices are swinging higher year-over-year in 2024, according to the Case-Shiller House Price Index. A homebuyer's personal credit score is more valuable than ever with mortgage rates remaining elevated. What are the biggest detriments to credit scores?

Yahoo Finance Personal Finance Editor Molly Moorhead joins Brad Smith to explain the best methods for consumers to balance and even improve their credit scores, including paying off debt, in relation to applying for a mortgage.

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

BRAD SMITH: Home prices are on the rise according to the latest reading of the Case-Shiller Index. The seasonally-adjusted national average seeing a 6% rise year over year and a 0.4% rise in the past month. Now, this comes as the housing market struggles with an inventory shortage and high mortgage rates.

And while both are making it difficult for Americans to buy homes, your credit score is also a very significant factor. It pre-determines what banks and lending institutions commonly refer to as worthiness. So let's bring in Yahoo Finance's Molly Moorhead to tell us more. Molly, first and foremost, we've got to begin there, how are consumer credit scores tied to mortgage rates?

MOLLY MOORHEAD: So your credit score is one of the key things a mortgage lender is going to look at when you apply for a loan and it tells them how good of a risk you are for lending money to. And your credit score is essentially a snapshot of how you've managed debt in the past and that can tell them how you're going to do managing it in the future. And it includes things like your record of on-time payments, your length of your credit history, meaning are you-- did you just take out your first credit card last year or have you bought cars before and paid off loans and shown that you can manage that debt. And generally, the higher your credit score, goes all the way up to 850, the better the rate you're going to qualify for. So it makes a very big difference when you apply for a mortgage.

BRAD SMITH: So what can people do to improve their credit score and make sure that they're getting more favorable rates when they go to apply for a mortgage or if they're just trying to make sure that they can make a car payment even in the future?

MOLLY MOORHEAD: There's a lot you can do. But I'll say this-- it's not easy and it doesn't happen fast. But the two biggest things you can do are pay your bills on time. Late payments really ding your credit score.