If you're planning to buy a home, your credit score will be one of the biggest factors in determining your loan options and overall affordability. A higher score can open the door to lower interest rates, better loan terms, and access to more down payment assistance programs.
What Is a Credit Score?
Your credit score is a three-digit number that summarizes your credit history. Most lenders use the FICO® Score, which ranges from 300 to 850. It’s based on factors like your payment history, credit utilization, length of credit history, new credit inquiries, and types of credit used.
Why Credit Scores Matter in Home Loans
Lenders use your credit score to assess risk. The higher your score, the more likely you are to repay your loan on time — which makes you a more attractive borrower. Here’s what a good score can impact:
- Interest rates: Higher scores typically qualify for lower rates, saving you thousands over the life of your mortgage.
- Loan approval: A low score might disqualify you from conventional loans and require special programs or higher down payments.
- Mortgage insurance costs: Some lenders charge more in insurance premiums if your credit score is below a certain threshold.
Minimum Scores by Loan Type
- Conventional loan: Usually requires at least 620, but higher scores get better rates.
- FHA loan: May be available with scores as low as 580 (or even 500 with a larger down payment).
- VA loan: No official minimum, but most lenders prefer 620 or higher.
- USDA loan: Typically requires 640 or higher.
How Your Score Affects Down Payment Assistance
Many down payment assistance programs have minimum credit score requirements, usually between 620 and 680. Improving your score may make you eligible for more options — including grants and forgivable loans.
Tips to Improve Your Score Before Buying
- Check your credit reports for errors and dispute any inaccuracies.
- Pay all bills on time — payment history is the biggest factor.
- Keep credit card balances below 30% of their limits.
- Avoid opening or closing accounts right before applying for a mortgage.
- Stay consistent — improvements can take a few months to reflect in your score.
Conclusion
Your credit score is more than just a number — it’s your key to unlocking better mortgage terms and more assistance options. Before you apply, take time to understand your score, improve it if needed, and choose the loan path that makes the most sense for your financial future.