Your credit score is one of the first things a mortgage lender looks at — and one of the biggest factors in both whether you're approved and what rate you're offered. Understanding the minimums, how the score is actually calculated, and what genuinely moves the needle can save you tens of thousands of dollars over the life of a loan.
Anyone preparing to apply for a mortgage who wants to understand exactly where their credit score needs to be — and what to do if it isn't there yet.
1. Minimum scores by loan type
| Loan type | Minimum credit score | Down payment required |
|---|---|---|
| Conventional | 620 | 3% |
| FHA (3.5% down) | 580 | 3.5% |
| FHA (10% down) | 500–579 | 10% |
| VA | No official minimum (lenders typically want 620+) | 0% |
| USDA | 640 recommended | 0% |
| Jumbo | 700–720+ | 10–20% |
Source: HUD and CFPB published guidelines. Individual lenders may set higher minimums.
2. How your FICO score is calculated
Most mortgage lenders use a FICO score, which weighs five factors:
Mortgage lenders typically pull scores from all three major bureaus (Experian, Equifax, TransUnion) and use the middle score. For joint applications, they typically use the lower of the two applicants' middle scores.
3. How your score affects your rate
The rate impact of credit score is substantial and often underestimated. A borrower with a 760+ score will typically receive the best available rate. As scores drop, lenders price in additional risk through higher rates — even for borrowers who still qualify for approval.
The gap between a 640 score and a 760 score can translate to a full percentage point or more in rate difference on a conventional loan — which compounds into tens of thousands of dollars over a 30-year term.
4. How to improve your score before applying
- Pay every bill on time — payment history is the single largest factor at 35%
- Reduce credit card balances — aim for utilisation below 30% of your limit, ideally below 10%
- Don't close old accounts — length of history matters; closing your oldest card can shorten your average account age
- Don't open new credit before applying — new accounts and inquiries can temporarily lower your score
- Dispute errors — review your free annual credit reports at AnnualCreditReport.com and dispute any inaccuracies
Most of these changes take 3–12 months to meaningfully move your score, so starting well before you plan to apply matters. See our full qualification guide for the complete picture beyond just credit score.
5. Worked example — the cost of a lower score
Two otherwise identical borrowers apply for the same $320,000 30-year fixed loan. The borrower with a 640 score is offered approximately 7.6%. The borrower with a 760 score is offered approximately 6.6%.
At 7.6%: monthly payment ≈ $2,267 · total interest over 30 years ≈ $496,120
At 6.6%: monthly payment ≈ $2,043 · total interest over 30 years ≈ $415,480
The difference: $224/month and $80,640 in total interest — purely from the credit score gap, on an identical loan amount and term.