What Credit Score Do You Really Need To Buy a House?

What Credit Score Do You Really Need To Buy a House?

When you're considering buying a home, your credit score is one of the most crucial factors to consider. Think of it as your financial report card that lenders review to determine if you qualify for a loan and which type of home loan is best suited for you. As the Mortgage Report says:

"Good credit scores communicate to lenders that you have a track record for properly managing your debts. For this reason, the higher your score, the better your chances of qualifying for a mortgage."

The trouble is, most buyers overestimate the minimum credit score needed to buy a home. According to a report from Fannie Mae, only 32% of consumers have a good understanding of what lenders require. That means nearly 2 out of every 3 people don’t.

To give you a rough idea, Experian says:

“The minimum credit score needed to buy a house can range from 500 to 700, but will ultimately depend on the type of mortgage loan you're applying for and your lender. Most lenders require a minimum credit score of 620 to buy a house with a conventional mortgage.”

Basically, it varies. So, even if your credit isn't perfect, there are still options available. FICO explains:

“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single “cutoff score” used by all lenders, and there are many additional factors that lenders may use . . .”

And if your credit score needs a little TLC, don’t worry—Experian suggests some simple steps you can take to improve it, including:

1. Pay Your Bills on Time

Lenders want to see that you can reliably pay your bills on time. This includes everything from credit cards to utilities and cell phone bills. Consistent, on-time payments demonstrate that you’re a responsible borrower.

2. Pay Off Outstanding Debt

Paying down what you owe can help reduce your overall debt and make you less of a risk to lenders. Additionally, it improves your credit utilization ratio (how much credit you're using compared to your total limit). A lower ratio indicates to lenders that you’re more reliable.

3. Don’t Apply for Too Much Credit

While it might be tempting to open more credit cards to build your score, it’s best to hold off. Too many new credit applications can result in hard inquiries on your report, which can temporarily lower your score.

Bottom Line

Your credit score is crucial when buying a home. Even if it’s not perfect, there are still pathways to homeownership.

Working with a trusted lender is the best way to understand how your credit score could impact your home loan options.