For many would-be homebuyers, credit scores feel like a mysterious gatekeeper to the American Dream. They know lenders care about that number—but how much it matters, what number is “good enough,” and how it all plays into qualifying for a mortgage? That’s where things get fuzzy.
In fact, according to research from Fannie Mae, 90% of buyers either don’t know the minimum credit score needed to get approved for a loan—or they overestimate it.
That means nine out of ten people could be unnecessarily holding back from buying a home. If you’re one of them, it’s time to separate perception from reality. Here’s what the data actually says about credit scores and how they affect your ability to become a homeowner in today’s market.
Most Buyers Think They Need Better Credit Than They Do
Let’s start with the biggest misconception: that you need an excellent credit score to buy a home. While a high credit score certainly helps, there’s no single, magical number that unlocks the door to homeownership.
Different loan programs come with different credit score requirements. And within each of those programs, lenders have their own flexibility. Here’s what recent data shows about the median credit scores for buyers across different loan types:
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Conventional loans: Around 750
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FHA loans: Roughly 680
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VA loans: Typically lower, around 700
These are averages, not minimums. Many buyers qualify with lower scores. In fact, the FHA program allows for credit scores as low as 580 (and sometimes even lower with a larger down payment). VA loans, available to eligible veterans and active service members, are also highly flexible and credit-friendly.
The takeaway? If you’re assuming you need a 750+ score to even apply for a loan, you may be sidelining yourself unnecessarily.
Why Lenders Care About Your Score
Although there’s no universal cutoff, your credit score does serve an important purpose. It gives lenders a snapshot of your financial habits—especially how you handle debt. Do you pay on time? Are your credit cards maxed out? Do you have a pattern of missed payments?
A lender doesn’t just want to know if you can afford a mortgage—they want to know if you’re likely to make your payments consistently over time.
Your credit score affects three critical parts of the mortgage process:
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Your eligibility: Whether you qualify for the loan in the first place.
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Your loan type: Whether you’ll use a conventional, FHA, VA, or other program.
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Your mortgage rate: The better your score, the better your chances of locking in a low interest rate.
And in today’s market—where mortgage rates have become one of the biggest factors in affordability—every decimal point matters.
A Higher Credit Score Can Save You Thousands
Let’s say two buyers take out a $350,000 30-year fixed mortgage. One has excellent credit (760+), and the other has fair credit (around 640). The difference in their interest rates could be more than a full percentage point. That might not seem like a lot, but over the life of a loan, it adds up.
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Higher score (e.g., 760+): ~6.75% interest
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Lower score (e.g., 640): ~7.85% interest
That difference could result in paying tens of thousands of dollars more over the life of the loan in additional interest.
So while you don’t need perfect credit to qualify, improving your score—even slightly—can result in significant savings.
Lenders Don’t All Use the Same Standards
Many people assume that there’s a strict, universal rulebook lenders follow when it comes to credit score requirements. But that’s not quite how it works.
As FICO, the company behind the most widely used credit scoring model, explains:
“There is no single ‘cutoff score’ used by all lenders, and there are many additional factors that lenders may use.”
This means one lender might accept a 620 score for a conventional loan, while another may require 660. Some lenders focus more on income, employment history, or down payment size than on credit score alone.
This variability is actually good news. It means if one lender turns you down, another might not.
Want to Improve Your Score Before Applying? Start Here
If you’ve spoken with a lender and found that your credit score is below the target for the type of loan you want—or you just want to qualify for better terms—there are actionable steps you can take.
According to the Federal Reserve Board, here are some proven strategies:
1. Always Pay On Time
Your payment history makes up the largest chunk of your credit score. Missing just one bill—credit card, student loan, utility—can cause a dip. Automate your payments when possible to avoid late fees and score penalties.
2. Lower Your Credit Utilization
This is the ratio of how much credit you’re using compared to your total available credit. Try to keep this below 30%, and ideally under 10%. That means if you have a $10,000 credit limit, avoid carrying more than $3,000 in debt.
3. Check Your Credit Reports for Errors
You can request a free copy of your credit report from each of the three major bureaus (Experian, TransUnion, and Equifax) once a year via AnnualCreditReport.com. Review them closely for mistakes, like accounts that aren’t yours or incorrect balances. Disputing errors can give your score a quick boost.
4. Don’t Open New Accounts Just to Build Credit
Each time you apply for a new credit line, a hard inquiry appears on your report. Too many inquiries in a short time can lower your score temporarily. Focus instead on managing existing accounts responsibly.
5. Keep Old Accounts Open
Length of credit history is another factor in your score. Even if you no longer use a card, keeping it open and active can be beneficial—especially if it has a long, positive history.
A Trusted Lender Can Be Your Best Resource
If you’re not sure where you stand, or how your credit score might affect your homebuying journey, speak with a mortgage professional. They can pull your credit, explain which programs you might qualify for, and help you identify the next steps—whether that means applying now or working on your credit for a few more months.
Many lenders also offer free pre-qualification, which doesn’t involve a hard credit inquiry and can give you a quick sense of what price range you’re working with.
Don’t assume you need to figure it all out on your own. Working with someone who understands the lending landscape—and how your personal financial profile fits into it—can give you clarity and confidence.
You Don’t Need Perfect Credit to Buy a Home
Let’s recap. If you’ve been sitting on the sidelines because you assumed your credit score was too low to qualify for a mortgage, now you know:
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There is no universal minimum score for getting a loan.
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Different loan types cater to different credit ranges.
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A high score helps, but it’s not always required.
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You can improve your score with a few targeted actions.
Most importantly, talk to a lender. They’ll help you understand your options and give you a clearer picture of what’s possible.
Final Thought
Buying a home isn’t just for people with spotless credit. It’s for people who are informed, prepared, and proactive. The truth is, many buyers qualify with credit scores well below what most people think is required. And even if you’re not ready today, you might be just a few steps away from turning the dream of homeownership into reality.
So before you count yourself out, get the facts. Your credit score might not be a dealbreaker—it might just be your starting point.