Your credit score matters. It can influence many areas of your life, often whether you expect it to or not.
Some people dismiss credit scores and decide not to work on improving them, but that approach can create avoidable obstacles.
Your credit score affects things like job applications, security deposits for utilities, renting a home, and—perhaps most importantly—qualifying for a mortgage and buying a house.
Fortunately, improving your credit score is often achievable with consistent effort, so it’s worth taking steps to raise it.
How important is your credit score when buying a house?
Answer: Very important.
The minimum credit score required to buy a house varies by lender and loan program, but generally scores in the 620–650 range are considered the lower threshold. Scores below that can make approval difficult or impossible, while higher scores open more options and better terms. Even within the 620–720 range, buyers may encounter limitations described below.
Here are the main ways your credit score can affect the home buying process.
Your credit score can determine whether you’re approved for a mortgage.
The first and most direct impact of your credit score is on mortgage approval. If your score is too low for the lender’s guidelines, your application may be denied outright.
As mentioned, the common minimum credit score to buy a house often falls around 620 to 650, but that can vary by lender, loan type, and other factors like income and debt levels.
Even if you meet the minimum, other issues tied to credit history or documentation can still affect approval.
Your credit score can limit the size of the loan you’re offered.
A lower credit score can reduce the mortgage amount a lender is willing to extend. That constraint may limit your housing choices and force you to look at less expensive properties than you might prefer.
Lenders use credit scores, income, and debt-to-income ratios together to assess how much risk they take on with each borrower. A stronger credit profile generally supports larger loan amounts.
Your credit score can affect the down payment required.
When a borrower’s credit score falls short of the lender’s preferred level, lenders may require a larger down payment to offset perceived risk. A higher down payment signals commitment and reduces the lender’s exposure if the borrower defaults.
For example, instead of a typical 20% down payment, a lender might ask for 25%–30% from someone with a weaker credit profile.
Your credit score influences the mortgage interest rate.
Your credit score plays a major role in the interest rate you receive. Even if your score is high enough for approval, it may not qualify you for the best available rates.
Small differences in rate can have a large impact on monthly payments. For example, a 1% higher interest rate can increase a mortgage payment by roughly $100 or more per month depending on loan size and term. That makes improving your credit score a valuable step toward reducing lifetime housing costs.
Related content: Everything You Need To Know About How To Build Credit
What was your credit score the last time you bought a home? Did it affect your home buying experience?