Minimum Credit Scores by Loan Type
Different mortgage programs have different requirements. Here's what each loan type requires:
Conventional Loans (Fannie Mae / Freddie Mac)
- Minimum score: 620
- Best rates: 740–760+
- Used for most home purchases. Available with as little as 3% down for first-time buyers (HomeReady, Home Possible programs).
- PMI required with less than 20% down, but can be removed once you reach 20% equity.
FHA Loans (Federal Housing Administration)
- Minimum score with 3.5% down: 580
- Minimum score with 10% down: 500
- FHA loans are backed by the government and designed for buyers with lower credit scores or smaller down payments.
- Downside: FHA mortgage insurance premium (MIP) lasts the life of the loan if you put down less than 10%, unlike conventional PMI which can be removed.
VA Loans (Veterans Affairs)
- VA minimum: No official minimum, but most lenders require 620+
- Available to eligible veterans, active-duty service members, and surviving spouses.
- No down payment required. No PMI. Competitive rates. One of the best mortgage products available for those who qualify.
USDA Loans (Rural Development)
- Minimum score: 640 (most lenders)
- Available for homes in eligible rural and suburban areas. Income limits apply.
- No down payment required. Low mortgage insurance costs.
Jumbo Loans
- Minimum score: 680–720 depending on lender
- For loan amounts above the conforming limit ($766,550 in most US counties in 2024).
- Stricter requirements because they're not backed by Fannie Mae or Freddie Mac.
How Your Credit Score Affects Your Interest Rate
Getting approved is one thing. The rate you're approved at is another — and the difference is substantial. Here's how credit score tiers typically affect rates on a conventional 30-year mortgage:
- 760–850: Best available rates — the lowest tier lenders offer
- 740–759: Very competitive, typically 0.1–0.2% above the best
- 720–739: Good, usually 0.2–0.4% above the best tier
- 700–719: Noticeably higher, roughly 0.4–0.6% above the best
- 680–699: Higher rates, 0.5–0.8% above the best tier
- 660–679: Significantly higher — worth improving before applying if possible
- 620–659: You can get approved, but at materially worse rates
On a $350,000 loan over 30 years, the difference between a 760 score and a 680 score can mean $150–250 more per month, and $54,000–90,000 more in total interest. That's the real cost of a lower credit score — not just approval, but rate.
Which Credit Score Do Lenders Use?
Most mortgage lenders pull your credit from all three bureaus — Equifax, Experian, and TransUnion — and use the middle score of the three. If you're applying with a co-borrower (spouse or partner), lenders typically use the lower of the two middle scores.
Mortgage lenders also generally use older FICO models (FICO Score 2, 4, or 5) rather than the newer FICO 8 or 9 models used by credit card companies. This means the score you see from a free credit monitoring service may differ from what a mortgage lender sees — sometimes by 10–30 points.
How to Check Your Credit Score Before Applying
Before applying for a mortgage, pull your full credit reports — not just your score. You can get a free report from each bureau at AnnualCreditReport.com. Review each report carefully for:
- Errors or inaccurate negative items (dispute these — can improve your score quickly)
- Late payments or collections you may have forgotten about
- Credit utilization ratio (what percentage of your available credit you're using)
- Accounts in derogatory status
Many banks and credit cards now offer free FICO scores. While these may not be the exact score your mortgage lender uses, they give you a useful baseline.
How to Improve Your Credit Score Before Buying
If your score is below where you want it, these actions have the biggest impact:
Pay Down Credit Card Balances
Credit utilization — the percentage of your available revolving credit you're using — is the second biggest factor in your score after payment history. Keeping utilization below 30% is good. Below 10% is better. If you have a $10,000 credit limit, aim to keep your balance under $1,000. Paying down a card from 80% utilization to 20% can add 20–50 points quickly.
Never Miss a Payment
Payment history is the single largest factor in your credit score (~35% of FICO). Even one 30-day late payment can drop your score significantly and stays on your report for 7 years. Set up autopay for the minimum on all accounts to prevent accidental misses.
Don't Open New Accounts
Each credit application generates a hard inquiry, which temporarily lowers your score. Don't open new credit cards, car loans, or store accounts in the 6–12 months before applying for a mortgage. The exception: mortgage rate shopping. Multiple mortgage inquiries within a 14–45 day window are typically counted as a single inquiry by scoring models.
Don't Close Old Accounts
Length of credit history matters. Closing an old credit card reduces your average account age and increases your utilization ratio (by reducing available credit). Keep old accounts open even if you rarely use them.
Address Collection Accounts
Unpaid collections can block mortgage approval. Paid collections are viewed more favorably, and newer scoring models (FICO 9, VantageScore 4.0) ignore paid collections entirely — though most mortgage lenders still use older models that factor them in.
How Long Does It Take to Improve Your Score?
Paying down credit cards shows up within 30–60 days (one billing cycle). Disputing and removing errors can take 30–45 days. Building a positive payment history takes time — consistent on-time payments over 12+ months have a compounding effect. If your score is 620–660 and you need 6–12 months to build it to 720+, that waiting period can save you tens of thousands in interest over the life of your loan.
Should You Wait to Buy or Buy Now?
If your score is below 620, you'll struggle to get conventional financing. If it's 620–679, you can get approved but at meaningfully worse rates. The math often favors waiting 6–12 months to improve your score — especially if you can realistically get it above 740. But if home prices or rates are moving against you, the calculus changes. Use our free Mortgage Calculator to compare scenarios at different rates and see what the real dollar difference is for your situation.
Key Takeaways
- Conventional loans require 620+; FHA accepts 580+ (or 500+ with 10% down)
- VA loans have no official minimum but lenders typically require 620+
- Your score doesn't just determine approval — it directly sets your interest rate
- A 760+ score gets the best rates; below 680 means significantly higher costs
- Pay down credit cards and dispute errors first — these move scores fastest
- Mortgage lenders use your middle FICO score from all three bureaus