What Credit Score You Need to Buy Your First Home

29 March 2025

Buying your first home is an exciting milestone, but it comes with a lot of financial hurdles—one of the biggest being your credit score. If you’ve ever wondered, "What credit score do I actually need to buy a house?"—you’re not alone! Your credit score plays a massive role in determining whether you'll qualify for a mortgage and how much it'll cost you in interest rates.

In this guide, we’ll break down everything you need to know about credit scores and home loans—from the minimum scores lenders accept to tips on improving your credit before you apply.

Understanding Credit Scores and Why They Matter

A credit score is like a report card for your financial habits. Lenders use it to decide if you're a responsible borrower. The higher your credit score, the more likely you are to get approved for a loan with favorable terms.

Credit scores typically range from 300 to 850, and they're determined by factors like:

- Payment History (35%) – Do you pay your bills on time?
- Credit Utilization (30%) – How much of your available credit are you using?
- Length of Credit History (15%) – How long have you had your credit accounts?
- Credit Mix (10%) – Do you have different types of credit (credit cards, loans, etc.)?
- New Credit Inquiries (10%) – Have you recently applied for new credit?

Mortgage lenders use this score to assess your risk level. The higher your score, the better your chances of snagging a low-interest rate.

Minimum Credit Score Required for Different Mortgage Loans

The credit score you need depends on the type of mortgage you're applying for. Some loans cater to first-time buyers with lower credit scores, while others require stellar credit.

1. Conventional Loans (620+)

A conventional loan is the most common type of mortgage. To qualify, you typically need a minimum credit score of 620.

- If your score is above 740, you’ll get access to the best interest rates.
- If it's below 620, approval becomes harder, and you may need a larger down payment.

2. FHA Loans (500-580+)

Backed by the Federal Housing Administration (FHA), these loans are great for first-time buyers with lower credit.

- A credit score of 580+ allows you to qualify with as little as 3.5% down.
- If your score is between 500-579, you can still get an FHA loan, but you'll need a 10% down payment.

3. VA Loans (580-620+)

If you're a veteran or active military member, a VA loan is an excellent option. These loans are backed by the U.S. Department of Veterans Affairs and often don't require a down payment.

- While the VA itself doesn’t set a minimum credit score, most lenders prefer a score of at least 580-620.

4. USDA Loans (640+)

USDA loans are designed for buyers in rural areas and are backed by the U.S. Department of Agriculture.

- While there’s no official minimum credit score, most lenders prefer a score of 640+ to qualify for this no-down-payment loan.

How Credit Scores Affect Your Mortgage Interest Rate

Your credit score doesn’t just impact loan approval—it also affects your mortgage rate. Think of it like this:

- Higher credit score = Lower interest rate
- Lower credit score = Higher interest rate

For example, someone with a 760+ credit score could get an interest rate of 5.5%, while another buyer with a 620 score might get 7% or higher.

Over a 30-year mortgage, that could mean paying tens of thousands of dollars more in interest!

Can You Buy a House With Bad Credit?

Yes, but it’s not easy! If your credit score is below 580, you still have options:

1. Work on improving your credit before applying.
2. Make a bigger down payment to reduce lender risk.
3. Find a co-signer with strong credit to help you qualify.
4. Look for lender-specific programs targeted at low-credit borrowers.

Many lenders have flexibility based on your income, employment, and other financial factors.

7 Tips to Boost Your Credit Score Before Buying a Home

If your credit score isn’t where you want it to be, don’t worry—there are steps you can take to improve it:

1. Pay Your Bills on Time

Payment history is the biggest factor in your credit score. Set up automatic payments to avoid missing due dates.

2. Reduce Your Credit Card Balances

Try to keep your credit utilization below 30%, but ideally under 10%, to improve your score.

3. Avoid Opening New Credit Accounts

Each time you apply for new credit, it triggers a hard inquiry, which can lower your score.

4. Check Your Credit Reports for Errors

Mistakes on your credit report can drag down your score. Get a free credit report from AnnualCreditReport.com and dispute any inaccuracies.

5. Keep Old Credit Accounts Open

The length of your credit history matters. Even if you don’t use a credit card anymore, keeping it open can help your score.

6. Become an Authorized User

Ask a family member with great credit to add you as an authorized user on their credit card. This can boost your credit score quickly.

7. Use a Credit-Boosting Program

Services like Experian Boost can help you add utility and phone bill payments to your credit history for a small boost.

Final Thoughts

Your credit score plays a huge role in buying your first home. While it’s possible to get a mortgage with less-than-perfect credit, a higher score can save you thousands of dollars in interest over time.

If your score isn’t where you need it to be, take the steps to improve it now—your future self (and your wallet) will thank you when you score a great mortgage deal!