Worried a low credit score will slam the door on homeownership? It’s not always the dealbreaker people assume. Let’s consider how your score affects mortgage options and what you should know when buying a home.

What do the numbers mean?

Credit scores typically range from 350 to 850. A score in the mid-600s is generally considered good; anything in the mid-700s and above is excellent. Higher credit scores typically result in better interest rates and more favorable loan terms.

The minimum credit score for loan approval can range from 500 to 700. However, many mortgage professionals want a minimum of 620 to approve conventional loans.

Credit Scores and Loan Types

While your credit score doesn’t dictate your mortgage type, scores often align with loan programs.

  • Conventional mortgages: The most common loan type, offering competitive interest rates and attractive terms. A minimum of 620 is typical.
  • FHA mortgages: Designed for borrowers with low incomes and limited credit histories, FHA loans have a government-set minimum of 500. A mortgage professional, however, may wish to see a minimum score in the upper 500s.
  • VA loans: While the U.S. government doesn’t set a minimum for VA loans, a score in the mid-500s is a common threshold for approval.
  • Jumbo loans: Used for higher-value homes, jumbo loans may require a minimum credit score of 700 or higher.

Who determines your credit score?

Three national credit bureaus (Equifax, Experian, and TransUnion) collect credit information. Scoring companies like FICO and VantageScore calculate credit scores based on factors including:

  • Payment history
  • Credit utilization
  • Types of credit accounts
  • Length of credit history

How can you increase your credit score?

  • Pay down your debt. Lowering your credit card balance can improve your credit score. A balance under 30% of your credit limit is good; under 10% is ideal. You may see improvements in 20 to 45 days.
  • Pay bills on time. Even one late payment can hurt your credit score. Reminders and autopay can help keep you on track.
  • Limit new credit applications. Applying for credit triggers a “hard inquiry,” which can temporarily lower your score.
  • Check for errors. You can get a free credit report from all three national bureaus. Review your reports and dispute any inaccuracies.