Credit Scores & Mortgage Approval
Learn how your credit score impacts your ability to get a mortgage and the rate you’ll pay.
Your credit score is one of the most important factors lenders consider when you apply for a mortgage. It’s a three-digit number that represents your creditworthiness and history of managing debt. A higher score indicates lower risk to the lender, which can result in a better interest rate and more favorable loan terms.
Why Your Credit Score Matters for a Mortgage
Lenders use your credit score to:
- Determine Eligibility: Different loan types have different minimum credit score requirements.
- Set Your Interest Rate: A higher credit score typically leads to a lower interest rate, which can save you tens of thousands of dollars over the life of your loan.
- Influence Your Loan Terms: Your score can affect the loan amount you’re offered and the type of loans you qualify for.
Minimum Credit Score by Loan Type
While requirements can vary by lender, here are the general minimum credit scores needed for popular loan types:
| Loan Type | Minimum Credit Score (General) |
|---|---|
| Conventional Loan | 620 |
| FHA Loan | 580 (with 3.5% down) or 500 (with 10% down) |
| VA Loan | No official minimum, but most lenders look for 620+ |
| USDA Loan | No official minimum, but most lenders look for 640+ |
| Jumbo Loan | 700+ |
For more details, see our Compare Loan Types page.
How to Improve Your Credit Score Before Applying
If your score is lower than you’d like, you can take steps to improve it. Start these actions at least 3-6 months before you plan to apply for a mortgage.
Top 5 Ways to Boost Your Credit Score
- Pay All Bills on Time: Payment history is the single biggest factor in your credit score (35%). Late payments can have a significant negative impact.
- Pay Down Credit Card Balances: Your credit utilization ratio (the amount of credit you’re using compared to your total credit limit) makes up 30% of your score. Aim to keep your utilization below 30% on all cards.
- Dispute Errors on Your Credit Report: Mistakes happen. Get a free copy of your credit report from all three bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com and dispute any inaccuracies.
- Avoid Opening New Credit Accounts: Each time you apply for new credit, it can result in a hard inquiry, which can temporarily lower your score. Avoid opening new credit cards or taking out other loans in the months leading up to your mortgage application.
- Keep Old Accounts Open: The length of your credit history (15% of your score) is important. Even if you don’t use an old credit card, keeping it open can help your average account age.
Common Credit Mistakes to Avoid
- Co-signing a loan for someone else: If they make a late payment, it will negatively affect your credit score.
- Closing old credit cards: This can shorten your credit history and increase your credit utilization ratio.
- Maxing out your credit cards: High balances hurt your credit utilization.
- Ignoring your credit reports: You might not be aware of errors or fraudulent activity that could be damaging your score.
Ready to Take the Next Step?
Once your credit is in good shape, the next step is getting pre-approved. This will give you a clear idea of what you can afford.
Learn About Pre-Approval