How to Buy a House With a Lower Credit Score
If you’re planning to purchase a home, your credit score is one of the most important financial factors to consider. Lenders use it to evaluate how risky it might be to loan you money. But exactly what is a good credit score to buy a house?
In general, a credit score of 620 or higher is required to qualify for most conventional home loans. However, the higher your score, the better your chances are of getting approved with favorable terms, such as lower interest rates and smaller down payments. A score of 740 or above is typically considered excellent and can help you secure the most competitive mortgage offers.
Credit Score Ranges and Their Impact
Credit scores typically fall within the following ranges:
300–579 (Poor): Very limited mortgage options. You may struggle to qualify and will face high interest rates.
580–619 (Fair): You may be eligible for government-backed loans like FHA, but interest rates may still be higher.
620–699 (Good): You can qualify for most conventional loans, though rates might not be the lowest.
700–739 (Very Good): You’re seen as a low-risk borrower and can expect better interest rates.
740–850 (Excellent): You’ll likely receive the best rates, terms, and mortgage options available.
Loan Types and Minimum Credit Scores
Your credit score affects which loan types you can qualify for. Here's a breakdown:
Conventional Loans: Minimum credit score required is 620. These are not backed by the government and usually offer better terms for higher scores.
FHA Loans: Backed by the Federal Housing Administration. You may qualify with a credit score as low as 580 with a 3.5% down payment, or 500 with a 10% down payment.
VA Loans: Available to eligible veterans and active-duty service members. Most lenders prefer a score of 620 or higher, though there's no official minimum.
USDA Loans: Designed for low- to moderate-income buyers in rural areas. A 640 score is generally preferred.
Why a Higher Credit Score Matters
A better credit score means you’re less of a risk to lenders, and that can translate to big savings over time. For example, someone with a score of 760 or higher could qualify for an interest rate that’s 1% to 1.5% lower than someone with a score in the 620–639 range. On a 30-year mortgage, this could save tens of thousands of dollars in interest payments.
$300,000 loan at 6.25% interest (high credit score): ~$1,847/month
$300,000 loan at 7.75% interest (low credit score): ~$2,151/month
That’s a difference of $300+ per month, or over $100,000 in total interest across 30 years.
Tips to Improve Your Credit Score Before Buying a Home
If your credit score isn’t quite where it needs to be, take these steps to improve it before applying for a mortgage:
Pay all bills on time: Your payment history accounts for 35% of your credit score.
Lower your credit utilization: Try to keep your credit card balances below 30% of your available limit.
Avoid opening new credit lines: Too many recent inquiries can temporarily lower your score.
Dispute errors: Check your credit report and dispute any inaccuracies that may be dragging down your score.
Keep older accounts open: A longer credit history helps improve your score over time.
So, what is a good credit score to buy a house? The simple answer is: at least 620 for conventional loans, but the closer your score is to 740 or higher, the better your chances of getting approved with great terms. Before you apply for a mortgage, take time to understand your credit standing, improve it where possible, and shop around with lenders to compare your options. A strong credit score not only opens the door to homeownership—it helps you save thousands in the long run.
