How Lenders Use Your Credit Score
When you apply for a mortgage, your lender pulls your credit report and score almost immediately. That number tells them, at a glance, how you've handled borrowing in the past — things like whether you pay on time, how much of your available credit you use, and how long you've had accounts open.
Lenders use this information to make two core decisions: whether to approve you and what interest rate to charge. A higher score suggests you're a lower-risk borrower, which gives lenders more confidence — and that confidence often shows up as a lower rate on your loan.
It's worth knowing that lenders typically pull scores from all three major credit bureaus (Equifax, Experian, and TransUnion) and use the middle score for qualification purposes. If you're applying jointly with a co-borrower, many lenders use the lower of the two middle scores.
Your Score Is One Part of the Picture
Credit score is an important factor, but lenders also weigh your debt-to-income ratio, employment history, down payment, and the type of loan you're seeking. A strong score with a high debt load, for instance, may still face underwriting hurdles. Think of your score as one lens through which lenders view your application — not the only one.
Credit Score Ranges and What They Generally Mean
While lenders set their own standards, score ranges give a useful frame of reference:
- 760–850: Typically qualifies for the most competitive rates available.
- 700–759: Generally considered strong; most loan programs accessible at favorable terms.
- 660–699: Still workable for many programs, though rates may be modestly higher.
- 620–659: The lower end of conventional loan eligibility; expect higher rates and possibly stricter requirements.
- Below 620: Conventional loan approval becomes difficult. Government-backed programs like FHA loans may still be an option — see how FHA and other loan types compare for more detail.
These ranges are general guidelines. Individual lenders may draw their cutoffs differently, and other factors in your application can shift what's available to you.
620
Typical minimum score for conventional loans
Most conventional mortgage lenders set a baseline credit score around 620, though individual lender requirements can be higher.
500
Minimum score for some FHA loans
The FHA program allows scores as low as 500 with a 10% down payment, making homeownership more accessible to buyers with limited credit history.
$70,000+
Potential extra interest from a 1-point rate difference
On a $300,000 30-year mortgage, a one-percentage-point rate increase can add more than $70,000 in total interest over the life of the loan.
The Real Cost of a Lower Score
The rate difference between a strong score and a borderline one might sound small — a half point or a full point — but spread across a 30-year mortgage, the dollar impact is substantial.
For example, on a $300,000 loan, the difference between a 6.5% and a 7.5% rate translates to roughly $200 more per month and over $70,000 in additional interest paid over the life of the loan. These figures will vary based on loan size, term, and market conditions, but the principle holds: your score has a measurable price tag.
Understanding how mortgage rates affect the broader housing market can also put your own rate in context — because market conditions and your personal score both influence what you're quoted.
Time Your Application Thoughtfully
If you're on the edge of a score range — say, 618 or 658 — it may be worth taking a few months to pay down balances or resolve any credit report errors before applying. Moving up even a tier can unlock meaningfully better loan terms. Talk with a mortgage professional about what timeline makes sense for your situation.
What You Can Do Before You Apply
If your score isn't where you'd like it to be, there are steps that may help raise it before you submit a mortgage application. The most impactful include paying all bills on time, reducing credit card balances relative to your credit limits, and avoiding opening new credit accounts in the months leading up to your application.
It also helps to review your credit reports for errors. You can request free reports from each bureau annually at AnnualCreditReport.com. Disputing inaccuracies — like accounts that aren't yours or incorrectly reported late payments — can sometimes result in a meaningful score improvement.
For broader guidance on building your credit profile over time, the Saving & Credit hub covers practical strategies for everyday financial decisions. And if you're also weighing the impact of your score on other borrowing — like a car loan — see what your credit score does to auto loan terms for a direct comparison.
This article is for general informational purposes only and does not constitute personalized financial, mortgage, or legal advice. Consult a licensed financial advisor or mortgage professional regarding your specific situation.
Frequently Asked Questions
Most conventional loans require a minimum score of around 620. FHA loans may accept scores as low as 500 with a larger down payment, though individual lenders often set their own higher minimums. The score you need also depends on the loan program you're pursuing.
The effect can be significant. Borrowers with scores in the 760–850 range typically qualify for the lowest available rates, while those in the 620–659 range may face rates that are noticeably higher. On a 30-year loan, even a half-point rate difference can add up to tens of thousands of dollars.
Checking your own credit (a soft inquiry) does not affect your score. When lenders pull your credit during underwriting (a hard inquiry), it can cause a minor, temporary dip. Multiple mortgage inquiries made within a short window — typically 14 to 45 days — are usually counted as a single inquiry by scoring models.
It's possible but more limited. Government-backed programs like FHA loans are designed to serve buyers with lower scores. However, a lower score often means a higher interest rate or stricter requirements. Working to improve your score before applying can open up better options.
Lenders also evaluate your debt-to-income ratio, employment history, down payment size, and the type of property you're buying. A strong score helps, but it's considered alongside your full financial picture.
The content on this site is for informational purposes only and is not a substitute for professional advice. Always consult a qualified professional for guidance specific to your situation.