Why your credit score matters when buying a home
Lenders use your credit score to gauge how you’ve handled debt in the past and how likely you are to repay what you borrow. FICO® credit scores range from 300 to 850, but the ideal credit score to purchase a home depends on the type of loan you’re applying for—from zero credit requirements to scores of 700 or more.
In general, the higher your credit score, the lower your interest rate, which could save you thousands of dollars over the life of your loan. A lower credit score can mean higher rates and stricter terms, placing more roadblocks between you and home sweet home.
How a higher credit score reduces interest
Let’s say you’re taking out a 30-year fixed loan for $300,000. With a credit score of 680, you might land a 7.44% APR. But bump up that score to 700, and your rate could drop to 7.32%. That 0.12% reduction in interest would save you $24 each month and $8,467 over the life of your loan. Now, just think about what you could do with those extra dollars.
FICO score vs. credit score
A credit score is the general term for the numbers that lenders use to help determine your creditworthiness. One of the most commonly used models is your FICO score, developed by the Fair Isaac Corporation.
PRO TIP
If you’re a Citi cardmember, you have free access to your FICO score—log in to check it out. If your bank doesn't partner with FICO, it’s worth checking to see if your credit card issuer does.
What is a good credit score to buy a home?
First, let’s go over the FICO score categories:
300-579: Poor
580-669: Fair
670-739: Good
740-799: Very Good
800-850: Exceptional
700 is a good spot to be in if you’re ready to go house hunting, and 740 is even better if you want to lock in the most competitive rates and save big on interest over time. See for yourself by plugging different interest rates into our Mortgage Calculator to explore how much you could save with a higher credit score. The minimum credit score to buy a house in 2025 still looks to be 500 if you’re using an FHA loan with a 10% down payment.
What credit score do you need for different types of loans?
Fortunately, you don’t need perfect credit to land a loan. Let’s check out several loan types and their typical credit requirements.
| Mortage type | Minimum credit score | Purpose |
|---|---|---|
| Conventional loans | 620 | For borrowers with good credit and stable income |
| FHA loans | 500 (with 10% down payment) 580 (with 3.5% down payment) | For first-time home buyers or people with lower credit and a smaller down payment |
| USDA loans | 640 | For rural home buyers in qualifying regions; requirements vary by lender |
| VA loans | 620 | For service members, veterans and eligible surviving spouses looking for no down payment; requirements vary by lender |
| Jumbo loans | 680 | For borrowers with strong credit buying in high-cost areas; requirements vary by lender |
Can you get a mortgage with no credit history?
Lenders know that a credit score doesn’t always tell the whole story. If you’ve never had a credit card or taken out a loan, you may not have a traditional credit history—but you still have a financial track record. In these cases, manual underwriting may be an option. This process involves a real person (not just an algorithm) reviewing other proof of your financial responsibility, such as:
- Rent
- Utilities
- Insurance premiums
- Phone plans
- Daycare/tuition
- Entertainment services
- Gym memberships
- Pay-over-time plans
On top of non-traditional forms of credit history, you can boost your approval odds by making a large down payment to mitigate the lender’s risk or by pursuing an FHA loan, which offers more lenient credit requirements.
How is your credit score calculated?
Three major credit bureaus report your credit score, using slightly different formulas: Equifax®, Experian® and TransUnion®. If you’re applying for a mortgage by yourself, a lender will use the median (or middle score) as your “official” credit score. If you’re applying for a mortgage with two or more people, the lender will typically go by the lowest median score of all the applicants.
In some cases, the average median score of all borrowers will be used.
Credit score evaluation in action
Let’s say you and a co-borrower submit a mortgage application together. If your median credit score is 600 and theirs is 700, most lenders would use your 600 score as the deciding number. That means the applicant with the lowest credit score may have the biggest impact on the lender’s decision.
How to improve your credit score before buying a house
So, you’re ready for a house, but your credit score isn’t? Don’t sweat it—we’ve got actionable ways to get that number into better shape.
1. Knock out existing debt
Lenders want to see that you can handle your current debt and have room to take on more. Chipping away at your existing debt not only feels good—it can have a positive impact on your credit. If you have big credit card bills or student loans, keep paying them down until they’re off your plate.
This helps your credit from two angles: your debt-to-income (DTI) ratio and your credit utilization ratio. Remember, the DTI ratio measures how well you manage debt. Your credit utilization ratio compares your spending to your credit limits. So, if you’re holding onto a high balance, lenders may assume you can’t handle any more debt.
2. Make payments on time
Lenders love a reliable borrower. When you build up a history of paying your bills on time, you look trustworthy, which can result in your credit score increasing. This applies to many payments, like electricity and phone bills, so it’s a good idea to stay on top of every expense.
3. Hold off on opening new lines of credit
To make a good impression, avoid applying for new credit accounts right before your mortgage application and during the approval process. If you do, your credit score could get dinged for hard inquiries on your credit report.
What else affects mortgage approval besides credit score?
Beyond your credit score, lenders factor in a few other indicators of creditworthiness: debt-to-income (DTI) ratio, loan-to-value (LTV) ratio and income. If you want to find out how well you currently manage debt, take the DTI Calculator for a spin.
| Factor lenders consider | Description | Requirements |
|---|---|---|
| Debt-to-income (DTI) ratio | The relationship between the debt you owe and the income you earn each month used to assess if you can manage another debt payment. | A DTI lower than 50% improves your odds. The lower your DTI, the more income you have to spare for an additional mortgage payment. |
| Loan-to-value (LTV) ratio | The home’s appraised value vs. the amount you’re borrowing, calculated by dividing the loan amount by the home price, written as a percentage. | Lenders typically look for an LTV ratio of 80% or lower, which is why a 20% down payment is often required. The more of your own money you invest upfront, the less risk the lender takes on. |
| Income | Salary can affect what type of loan you qualify for and the interest rate you’re offered. | Lender requirements vary, but most will want proof of income via bank statements, paystubs and W-2s. FHA and USDA loans are ideal for lower credit borrowers. |
Where to check and monitor your credit score for free
Keep tabs on your progress by monitoring your creditworthiness. You can review your past credit history (but not your score) for free each week via the government-authorized AnnualCreditReport.com. You can also track your credit score for free weekly through services like Credit Karma, Experian or banks that offer FICO score access.
