If you’re planning to buy a home, your credit score will play a major role in whether you get approved for a mortgage—and how much that loan will cost you. A strong credit score can save you tens of thousands of dollars in interest over the life of your loan, while a low score can mean higher rates, stricter requirements, or even denial.
Next to saving for a down payment, taking the time to clean up your credit score is one of the most impactful financial moves you can make before house hunting. Both directly affect how much house you can afford and your ability to secure financing. The good news? Even a few months of focused effort can make a meaningful difference.
Here’s what first-time homebuyers need to know about credit scores, how they impact your mortgage, and what you can do to improve yours before applying.
What credit dcore is needed to buy a house?
There’s no single credit score requirement for buying a home—it depends on the type of loan you’re applying for. Generally, you’ll need a minimum score of 580 to 620 for most programs, but higher scores unlock better interest rates and loan terms.
Conventional loans typically require at least 620, though lenders may accept lower scores if you have a larger down payment or other strong financial factors. Most conventional loans use 30-year fixed mortgage rates, where your credit score directly impacts your interest rate.
There are some alternative paths to homeownership for buyers with lower credit scores, however.
“Programs like FHA and USDA loans are specifically designed to help buyers with lower credit scores qualify for a home as long as their financial picture makes sense,” says Jake Vehige, president of mortgage lending at Neighbors Bank. “People think they are a workaround, but they are a mainstream pathway that millions of buyers use.”
FHA loans are a strong option for first-time homebuyers or buyers with credit in the low-to-mid 600s. They allow for more flexibility on your credit score and a smaller down payment—as low as 3.5%. USDA loans are for buyers in qualifying geographic areas, offering zero-down payment with a competitive interest rate.
Why credit scores matter for mortgage approval
Lenders use your credit score to assess risk. A higher score signals that you’re a reliable borrower who pays debts on time, while a lower score suggests higher risk. This translates directly to what kind of loan you’ll be offered.
“Your credit score doesn’t just determine if you are approved, it influences your interest rate and the monthly payment you are offered,” says Vehige. “Even a small difference in interest rates can add up to thousands of dollars over the life of a loan.”
Your credit score also influences how much you can borrow. Lenders calculate your debt-to-income ratio (DTI) and consider your credit history when determining your loan amount. A higher credit score gives you more negotiating power and access to better loan options.
That said, once you are above a certain credit threshold, the impact on your rate levels off.
“Going from poor credit to good credit matters a lot more than going from very good to excellent credit,” says Vehige. “We see our borrowers’ payments change the most when they cross key score bands. For example, moving from the mid 600s to high 600s can noticeably lower rates and expand your loan options.”
How to check your credit score before buying a home
Before applying for a mortgage, check your credit score and review your credit report for errors. You’re entitled to free weekly credit reports from each of the three major credit bureaus—Equifax, Experian, and TransUnion.
Your credit score itself may require a paid service or can often be accessed for free through your bank or credit card issuer. Many lenders also provide a preliminary credit check during the pre-qualification process.
Review your report carefully. Look for mistakes like incorrect late payments, accounts that don’t belong to you, or outdated information. Disputing errors can quickly boost your score if they’re dragging it down.
Pay attention to the factors affecting your score: payment history, credit utilization, length of credit history, new credit, and credit mix. Understanding these helps you focus your improvement efforts where they’ll have the most impact.
Best ways to improve your credit score for homebuyers
If your credit score needs work, start as early as possible. Even small improvements can make a difference in your mortgage terms.
Here are the most effective strategies:
- Pay down credit card balances: High credit utilization hurts your score. Aim to use less than 30% of your available credit, ideally under 10%. Paying down balances has an immediate positive effect. This is “the fastest win,” says Vehige.
- Pay all bills on time: Payment history is the biggest factor in your score. Set up automatic payments to avoid missed deadlines.
- Avoid opening new credit accounts: Every new application triggers a hard inquiry, which temporarily lowers your score. Above all else, “refrain from adding new debts,” advises Vehige.
- Don’t close old accounts: Length of credit history matters. Keep older accounts open even if you’re not using them, as they help your average account age.
- Dispute errors on your credit report: If you find mistakes, file disputes with the credit bureaus immediately. Correcting errors can boost your score quickly.
One tempting path is to utilize credit repair services, but some experts say you’re better off on your own.
“I can’t think of a single instance where it makes sense to pay for credit repair services,” says Cayden McLaughlin, a financial planner at WealthAdvisor365. “Buyers can effectively repair credit themselves by taking advantage of free resources. In other words, everything a credit repair company does, you can do yourself.”
If you’re seeking more guidance, McLaughlin recommends referring to guides from the Federal Trade Commission and the Consumer Financial Protection Bureau—which offer step-by-step guides for rebuilding credit—and the tools and resources from reputable nonprofits like the National Foundation for Credit Counseling.
Credit score requirements by loan type
Different loan programs have different credit requirements:
- Conventional loans: Minimum 620, but 740+ gets the best rates. Require private mortgage insurance (PMI) if down payment is less than 20%.
- FHA loans: Minimum 580 for 3.5% down, or 500 to 579 for 10% down. Popular with first-time buyers due to flexible requirements.
- VA loans: No official minimum, but most lenders require 620+. Available to veterans, active military, and eligible spouses with no down payment required.
- USDA loans: No official minimum, but most lenders require 620+. For rural and suburban properties with no down payment required for eligible buyers.
When choosing a home loan, consider both your current credit score and your timeline. If you’re close to a higher tier (like moving from 680 to 700), a few months of credit improvement could unlock significantly better rates. Use a mortgage calculator to see how different rates affect your monthly payment, or an affordability calculator to estimate your buying power.
Your credit score isn’t permanent. With focused effort, most buyers can improve their score within a few months and access a variety of home loan options. Start early, monitor your progress, and work with a lender that can guide you on the best path forward based on your specific situation.
