Credit

Credit Score Mortgage Guide

How your credit score affects mortgage eligibility, interest rates, and what you can do to improve it before applying.

NMHL Team2026-01-0711 min read

Credit Scores Explained

Your credit score is a three-digit number that represents your creditworthiness to lenders. FICO scores, the most commonly used in mortgage lending, range from 300 to 850. The score is calculated based on five factors: payment history (35%), amounts owed or credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%). Mortgage lenders pull your scores from all three major credit bureaus, Equifax, Experian, and TransUnion, and typically use the middle score for qualification purposes. Understanding how your score is calculated empowers you to take targeted actions that improve it most effectively.

Payment history and credit utilization together account for 65% of your credit score. Focusing on these two factors provides the fastest path to score improvement.

Key Credit Score Thresholds for Mortgages

Different mortgage programs have different minimum credit score requirements that serve as important thresholds. At 500, you may qualify for FHA loans with 10% down. At 580, FHA loans open up with just 3.5% down, which is the most common entry point for homebuyers. At 620, conventional loans become available with as little as 3% down. At 680, you enter favorable pricing territory with lower PMI and better rates. At 740 and above, you qualify for the best available rates across all programs. Each threshold represents a meaningful improvement in your available options and terms.

Key Tips

  • Know your current score and identify which threshold you are closest to for targeted improvement
  • Even moving from 578 to 580 can make a dramatic difference in your mortgage options
  • Check if there are quick wins like disputing errors that could push you to the next tier

Improving Your Credit Score

Improving your credit score before applying for a mortgage can save you tens of thousands of dollars. The fastest improvement strategies include paying down credit card balances below 30% of their limits, making all payments on time, disputing errors on your credit reports, becoming an authorized user on a family member's account with a long positive history, and avoiding new credit applications. Credit card balance payoff provides the most immediate impact, often adding 20-40 points within one billing cycle. Disputing errors can add points within 30-45 days. Most borrowers can improve their score by 40-80 points within 3-6 months with focused effort.

Key Tips

  • Pay credit card balances down to below 10% utilization for maximum score impact
  • Request free credit reports from annualcreditreport.com and dispute any inaccuracies
  • Do not close old credit accounts as the length of history helps your score
  • Set up automatic minimum payments on all accounts to prevent missed payments

Protecting Your Credit During the Mortgage Process

Once you start the mortgage process, protecting your credit score becomes critical. Avoid opening new credit cards or loans. Do not make large purchases on credit. Do not close existing credit accounts. Avoid changing jobs if possible. Continue making all payments on time. Do not co-sign loans for others. Your lender will pull your credit at the beginning of the process and again just before closing. Any significant changes to your credit profile during this period can delay or derail your mortgage approval. Maintain financial stability from application through closing day.

A single missed payment during the mortgage process can drop your score by 60-100 points and potentially disqualify you from your approved loan.

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Frequently Asked Questions

The absolute minimum is 500 for FHA loans with 10% down. FHA with 3.5% down requires 580. Conventional loans need 620. VA loans typically require 580-620 depending on the lender. Non-QM loans may accept lower scores with compensating factors.

With focused effort, you can see meaningful improvement in 30-90 days. Paying down credit card balances can add 20-40 points within one billing cycle. Disputing errors takes 30-45 days. Most borrowers can gain 40-80 points within 3-6 months.

No, checking your own credit score is a soft inquiry and has no impact on your score. Only hard inquiries from lenders affect your score, and multiple mortgage inquiries within a 14-45 day window count as a single inquiry.

Related Resources

First-Time Homebuyer Guide

Complete guide for first-time buyers including credit preparation.

Mortgage Pre-Approval Guide

How pre-approval works and why your credit score matters.

Mortgage After Bankruptcy Guide

Rebuilding credit and qualifying for a mortgage after bankruptcy.

FHA Loans

Federal Housing Administration (FHA) loans are government-backed mortgages designed to help first-time homebuyers and those with less-than-perfect credit achieve homeownership. With lower down payment requirements and flexible credit guidelines, FHA loans make homeownership accessible to more Americans.

Conventional Loans

Conventional loans are not backed by government agencies and typically offer the most flexibility for qualified borrowers. With options for as little as 3% down and the ability to cancel mortgage insurance, conventional loans are ideal for borrowers with good credit.

VA Loans

VA loans are a benefit earned by veterans, active-duty service members, and eligible surviving spouses. Backed by the Department of Veterans Affairs, these loans offer unmatched benefits including no down payment, no mortgage insurance, and competitive rates.

Non Qm Loans

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