Without solid credit, becoming a homeowner may be that much more challenging. While credit score is not the only thing that lenders weigh when evaluating mortgage applications, it is a major factor in determining whether or not you get approved for a mortgage and what your interest rate will be.
Lately, it seems credit requirements are getting harder to meet. The “average credit score of people who successfully obtained a mortgage” has “skyrocketed starting in 2007 and continued to climb in recent years, hitting a high of 742 in 2024 — 29 points above the average credit score in the U.S.” said The Washington Post. Meanwhile, the “share of mortgages going to people with credit scores in the 600s has plummeted.”
What credit score do you need to buy a house?
To buy a house, “most mortgages (including the popular conventional loan) need a credit score of at least 620,” said NerdWallet. Credit requirements can, of course, vary from lender to lender and depending on the specific loan.
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Having a score that’s lower than the typical minimum does not automatically mean you are out of the running for a home loan. Certain loan programs work with borrowers with lower scores. For instance, FHA loans insured by the Federal Housing Authority require a minimum credit score of just 500 if you can make a down payment of at least 10%.
In general, the higher your credit score, the better your odds of approval — and of landing a lower mortgage rate. Lenders tend to look more favorably upon more creditworthy borrowers, especially with a loan as sizable as a mortgage.
What other factors do mortgage lenders weigh?
Alongside credit history, “lenders will also consider your income, employment history and debt, along with the amount of the mortgage you’re requesting and your down payment,” said U.S. Bank.
Lenders are essentially attempting to verify, to the extent it is possible, that you are likely to make good on your loan payments. That is why, for example, “if you've been in the same salaried position or industry for a long time, you may have better odds of getting good terms than someone with a spotty job history or who is self-employed with irregular income,” said Experian.
What if your credit score is not high enough to get a mortgage?
Taking steps to improve your credit score makes sense prior to applying for a mortgage. Not only will it increase your odds of approval, but it can also help you land a lower interest rate. Some simple ways to do this include improving your credit utilization ratio, either by paying down existing debt or increasing available credit, and reviewing your credit report for any mistakes. Avoid applying for any new accounts in the interim, and don’t underestimate the impact of making on-time payments.
Beyond improving your credit, you can also shop around with different lenders. “One lender might be more accepting of your situation and offer a better rate,” said Fidelity. Just “be prepared to discuss your financials and explain why you’d be a good borrower, even with a lower credit score.”
