Your credit score is the first thing lenders check, and it determines whether you get approved, what interest rate you pay, and how much down payment you need

Lenders use your credit score to predict whether you will repay a mortgage. A higher score signals lower risk to them, which means lower interest rates, smaller down payments, and faster approval. A lower score can mean higher rates, larger down payments, or outright rejection. The relationship is direct: every 20-point drop in your score can cost you tens of thousands of dollars over the life of a loan.

Most mortgage lenders use scores from one of three bureaus — Equifax, Experian, or TransUnion — and they typically pull all three. The score they see may differ slightly from the score you see online, because lenders use older versions of the scoring model and weight recent payment history more heavily than consumer sites do. What matters is the score the lender actually pulls, not the one you check yourself.

Key Takeaways

  • Mortgage lenders typically require a score of at least 620, though 740 or higher unlocks the best rates and terms.
  • A 100-point difference in your score can change your interest rate by 0.5 to 1 percentage point, costing you $50,000 to $100,000 over 30 years.
  • Down payment requirements drop sharply once your score reaches 740 — below that, lenders often require 10 to 20 percent down.
  • Recent payment history and the amount you owe relative to your credit limits matter more than old negative marks, so improving your score is possible even with past damage.
  • Your score is only one factor; lenders also check your income, employment history, and debt-to-income ratio before approving a mortgage.

What score ranges mean for mortgage approval

Most conventional lenders will not approve a mortgage below 620, though some government-backed programs (FHA, VA, USDA) accept scores as low as 500 to 580. Between 620 and 739, you will be approved, but at higher rates and with larger down payments. At 740 and above, you enter the tier where rates drop noticeably and down payment requirements fall to 3 to 5 percent.

The exact cutoffs vary by lender and loan type. A bank may require 680 minimum while a credit union requires 640. An FHA loan may accept 580 while a conventional loan from the same lender requires 660. Call the lender directly and ask their minimum, because published ranges are often higher than what they will actually consider.

Your score is not static during the mortgage process. Lenders pull it again before closing, so a missed payment or new debt in the weeks before closing can kill an approval. Do not open new credit cards, miss payments, or make large purchases once you have applied.

How your score affects interest rates and monthly payments

Interest rates move with your credit score in bands. A borrower with a 760 score might get 6.5 percent on a 30-year mortgage, while a borrower with a 660 score gets 7.2 percent on the same loan amount. That 0.7 percentage point difference costs roughly $100 per month on a $300,000 loan — or $36,000 over 30 years.

The exact rate depends on the lender, the loan type, current market conditions, and the size of your down payment. Rates change daily, so two lenders quoting the same day may differ by 0.25 percent. Shop with at least three lenders and ask each one for a Loan Estimate, which shows the rate, fees, and monthly payment side by side. The Loan Estimate is free and does not lock you in.

Points (also called discount points) let you pay money upfront to lower your rate. One point costs 1 percent of the loan amount and typically lowers your rate by 0.25 percent. Whether points make sense depends on how long you plan to stay in the home — if you sell in five years, paying points upfront may not save you money. Ask the lender to calculate the break-even point for you.

Down payment requirements tied to credit score

Lenders use your credit score to decide how much skin you need in the game. With a score above 740, you may put down as little as 3 percent on a conventional loan. Between 680 and 740, expect 5 to 10 percent. Below 680, many lenders require 15 to 20 percent down, and some will not lend at all.

A larger down payment protects the lender if home prices fall and you default. It also means you borrow less, so your monthly payment is lower and you pay less interest overall. But it also means you need more cash upfront, which many buyers do not have. If your score is low, improving it before applying can save you tens of thousands in down payment money.

Government-backed loans (FHA, VA, USDA) have different down payment rules and often accept lower scores. FHA loans require 3.5 percent down and accept scores as low as 580. VA loans require zero down and accept scores as low as 500 in some cases. USDA loans require zero down for rural properties and accept scores around 580. If your conventional options are limited, ask about these programs.

What damages your score and how long it takes to recover

Late payments, collections, foreclosures, and bankruptcies all damage your score. A 30-day late payment drops your score by 100 to 150 points. A foreclosure or bankruptcy can drop it by 200 points or more. The damage is worst in the first two years after the event, then fades gradually over time.

A late payment from seven years ago hurts less than one from seven months ago. A bankruptcy from ten years ago may not appear on your credit report at all (Chapter 7 bankruptcies fall off after ten years; Chapter 13 after seven). This means your score can recover even after serious damage, as long as you do not repeat the mistake.

Recent positive history matters more than old negative history. If you had a foreclosure five years ago but have made every payment on time since, your score will be higher than someone with a foreclosure two years ago and spotless payments since. Lenders see the recovery as a sign you have stabilized. Some lenders have explicit waiting periods — they will not lend to you until two years after a foreclosure, for example — but the score itself improves faster than the waiting period.

Steps to improve your score before applying for a mortgage

If your score is below 740, you have options. The fastest improvements come from paying down credit card balances. Your credit utilization — the percentage of your credit limit you are using — accounts for about 30 percent of your score. If you have a $10,000 limit and a $8,000 balance, paying it down to $2,000 can raise your score by 50 to 100 points in one or two months.

Make all payments on time for at least six months before applying. A single late payment can drop your score by 100 points, so consistency matters. Set up automatic payments if you struggle to remember due dates. Even one missed payment in the months before you apply can cost you a full percentage point in interest rate.

Do not close old credit cards after paying them off. The age of your accounts and the total credit available to you both affect your score. Closing a card lowers both, which can drop your score by 20 to 50 points. Keep the card open and use it occasionally to show activity.

Dispute errors on your credit report. You can request a free report from each bureau once per year at annualcreditreport.com. If you see a late payment that was not yours, a debt you paid off but still shows as open, or a collection account that belongs to someone else, dispute it with the bureau in writing. Removing errors can raise your score by 50 to 200 points depending on what is wrong.

Other factors lenders consider alongside your credit score

Your score is important, but it is not the only thing lenders look at. They also check your debt-to-income ratio — the percentage of your monthly income that goes to debt payments. Most lenders want this below 43 percent. If you earn $5,000 per month and already owe $1,500 in car loans, student loans, and credit card minimums, a new mortgage payment above $650 may push you over the limit.

Lenders verify your income through tax returns, W-2s, and recent pay stubs. They check your employment history to see if you have been at your job for at least two years. A job change in the last 90 days can complicate approval, especially if you changed industries. They also order an appraisal to confirm the home is worth what you are paying for it.

The size of your down payment matters independently of your score. A larger down payment can offset a lower score. If your score is 680 but you put down 20 percent, some lenders will approve you at rates closer to what a 720-score borrower would get. Conversely, a high score with a very small down payment (3 percent) may still mean a higher rate than a lower score with 10 percent down.

Frequently Asked Questions

Can I get a mortgage with a credit score below 620?

Yes, through FHA, VA, or USDA loans, which accept scores as low as 500 to 580. Conventional lenders rarely go below 620. FHA loans are the most common option for lower scores and require only 3.5 percent down, though you will pay mortgage insurance premiums that add to your monthly cost.

How much will my interest rate drop if I improve my score by 50 points?

A 50-point improvement typically lowers your rate by 0.25 to 0.5 percentage points, depending on the lender and current market conditions. On a $300,000 loan, that saves $30 to $60 per month. The exact savings depend on which score band you move into — jumping from 679 to 729 may save more than jumping from 729 to 779.

Should I pay off all my debt before applying for a mortgage?

Paying off high credit card balances helps your score, but paying off installment loans (car loans, student loans) right before applying can hurt it by changing your credit mix and payment history. Focus on lowering credit card balances to below 30 percent of your limit, then stop making large changes to your credit profile.

What if my score is too low but I need a house now?

Consider waiting three to six months while you improve your score, since even modest improvements can save you thousands in interest and down payment money. If you cannot wait, FHA loans are your fastest option. You can also ask a co-borrower with a higher score to apply with you — lenders average both scores or use the lower one depending on the loan type.

Do mortgage lenders use the same credit score I see online?

No. Lenders use older scoring models (usually FICO 2, 4, or 5) that weight recent payment history more heavily than newer consumer models do. Your online score may be 50 to 100 points higher or lower than what the lender sees. Ask the lender for the exact score they pulled so you know what you are working with.