What Credit Score Is Needed to Buy a House?

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What we'll cover:

  • Your credit score is a top factor that impacts your interest rates when you apply for a home loan
  • You may be more likely to quality for a conventional fixed-rate mortgage with a 620+ credit score
  • You may get better conventional fixed-rate mortgage terms with a 700+ credit score

Curious about the credit score needed to buy a house? The real question is, what credit score do you need to get a good rate on a mortgage? After all, your credit score is a top factor that impacts interest rates you’re offered when you apply for a home loan. 

But if you’re in the market to buy a home, you’re probably spending enough time debating square footage, local schools, how much you really want that open floorplan, etc. Credit scores are likely the last thing you want to think about.

So let’s make this easy, shall we? 

How your credit score is calculated 

First, take a look at the following elements that are considered when  building a credit score:

  • Timeliness of payments
  • Amount of credit used
  • Length of credit history 
  • Frequency of credit applications
  • Variety of accounts

The FICO score, developed by the Fair Isaac Corporation and a popular method used by lenders, weights those factors as follows:

  • Payment history: 35%
  • Credit utilization: 30%
  • Credit history length: 15%
  • New credit applications: 10%
  • Types of credit: 10%

The better your performance in each area, the higher your credit score may be. Learn more about credit score ranges and how to improve your credit score. 

How your credit score matters

FICO ranks credit scores from a low of 300 to a high of 850  and within those rankings, the average American’s credit score stands at 704.   

Besides qualifying for a mortgage, your credit score can affect the interest rate you’ll pay on the loan. 

Typically, mortgage lenders consider you to be less risky if your credit score is higher. Conversely, a lower credit score may represent more risk. And you could end up paying more in the long run because lenders may offer higher interest rates for loans they perceive as riskier. 

What is a good credit score to buy a house?

Some lenders have a baseline score at which they reject applications . 

When it comes to conventional fixed-rate mortgages, the simple answer is with a score of 620 or better, you may be more likely to qualify, while a score of 700 or better may get you better terms.  

Ultimately, the higher your credit score, the better chance you have of securing a lower interest rate. According to myFICO.com, here’s what this looks like based on FICO scores for a 30-year, $400,000 fixed-rate mortgage:

Rates as of September 17, 2019

Credit tips when applying for a mortgage

There are a handful of financial to-dos you’ll want to cross off if you’re buying a home. However, when it comes to credit specifically, here are five tips to consider:

  • Check your credit score. Many banks have arrangements with FICO to give customers free access to credit scores. 
  • Request credit reports and dispute any errors. You can get a free, annual credit report from each of the three main reporting agencies at AnnualCreditReport.com. Make sure your personal information and employment history is accurate, and check that each of your financial accounts is only listed once. The Consumer Financial Protection Bureau has a comprehensive checklist that includes steps for filing a dispute if you catch an error. 
  • Maintain a low debt-to-income ratio. Also known as your DTI, it’s a good idea to keep your debt-to-income ratio low when you’re applying for a mortgage. How low? Generally, the lower the better, but generally 43% is the highest DTI you can have and still get a qualified mortgage. A qualified mortgage is simply a type of loan that has more certain, stable features (aka no “risky loan” features or excess upfront fees). 
  • Keep your credit utilization low. The golden rule is keeping your utilization across all lines of credit below 30 percent.
  • Don’t open any new lines of credit. Since applying for new credit can impact your credit score, you probably want to avoid doing so until after you’ve got your mortgage. Opening new lines of credit may also be a red flag for mortgage lenders, who may question your financial stability. 

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.