Credit Scores & Mortgages: What You Need to Know

Why Credit Scores Matter

Your credit score is one of the most important factors in determining your mortgage rate, loan eligibility, and overall borrowing cost. A higher score typically means a lower interest rate, which can save you tens of thousands of dollars over the life of your loan.

Lenders use the middle of your three credit bureau scores (Equifax, Experian, TransUnion) to qualify you. For joint applications, the lower middle score is used.

Minimum Credit Scores by Loan Type

• Conventional Loans: 620 minimum (stronger credit improves pricing)
• FHA Loans: 580 with 3.5% down, or 500 with 10% down
• VA Loans: No official VA minimum — most lenders require 580-620
• USDA Loans: 640 typical minimum
• DSCR / Investor Loans: 660-680 typical minimum
• Non-QM Loans: Programs available down to 500, depending on compensating factors
• Bank Statement Loans: 660+ typical

How Credit Scores Affect Your Rate

As a general guideline, here's how credit scores impact conventional mortgage rates:

• 760+: Strongest available rates — maximum savings
• 740-759: Slightly higher than the best tier — minimal difference
• 720-739: Good rates, small premium
• 700-719: Moderate increase
• 680-699: Noticeable premium — consider improving before applying
• 660-679: Significant premium — additional PMI cost impact
• Below 660: Limited conventional options — FHA/VA may be better

Even a 20-point improvement can save $50-150+ per month on a typical loan. Working with a mortgage broker like Airus Lending lets you shop across multiple lenders to find a strong rate for your specific score.

How to Improve Your Credit Score

1. Pay down credit card balances — Get utilization below 30% (below 10% is ideal)
2. Don't close old accounts — Length of credit history helps your score
3. Dispute errors — Check all three bureaus and dispute any inaccuracies
4. Become an authorized user — Have a family member with good credit add you to their account
5. Add alternative credit data — Some lenders accept rent, utilities, and subscription payments
6. Avoid new credit inquiries — Multiple hard pulls within 14-45 days count as one inquiry for mortgage shopping

What NOT to Do Before Applying

• Don't open new credit cards or loans
• Don't make large purchases on credit
• Don't co-sign for someone else
• Don't close existing credit accounts
• Don't change jobs or reduce income