Managing your credit score can help you purchase your dream home

Credit and house shopping

Managing your credit score can help you purchase your dream home.

Understanding how credit affects home buying

Your credit history can play a significant role in the process of buying a house. Whether you’re a first-time homebuyer or an experienced homeowner, monitoring your credit is an important first step in exploring your options and preparing for success.

A GOOD CREDIT SCORE CAN HELP YOU:

Qualify for a loan

Secure a better rate

Pay less upfront

Lower lifetime costs

Credit Impact When Buying a Home

Is there a minimum credit score needed to purchase a home?

Credit score requirements may vary from lender to lender, and the exact number can vary depending on the scoring model the lender uses. For conventional mortgages, most lenders look to see if you have at least a 620 FICO® score. Government-backed mortgages—like those guaranteed by the FHA, the USDA or the VA—may have different credit score minimums. In any case, a good credit score may mean a better interest rate. Knowing your credit score, such as the TransUnion® VantageScore® 3.0 credit score you can access through CreditWise, is a smart step if you’re thinking about buying a house.

Credit Impact When Buying a Home

Improving your mortgage application

Lenders use your credit score to assess risk and estimate how likely you are to make mortgage payments on time. Payment history and the amount of available credit are some factors that affect creditworthiness. Reviewing your credit report for entries that may impact a mortgage application is crucial, such as potentially fraudulently opened accounts. CreditWise monitors credit report changes from two major credit bureaus so you can review them for signs of identity theft and errors.

Willl a mortgage affect my credit score?

Applying for a mortgage may temporarily lower your credit score—but in the long run, buying a house can affect your credit positively if you make on-time payments.

WHAT COULD AFFECT YOUR CREDIT SCORE

Pre-approval

Preapprovals typically require hard inquiries, which can cause temporary score dips.

Closing a loan

Closing on a loan may also temporarily drop your credit score, at first.

On-time payments

Establishing a pattern of on-time payments may increase your score, over time.

Simulate your score

Our Credit Score Simulator can show how actions you take might affect your score.

GENERAL CREDIT FAQs

How many types of credit scores are there?

There are many different credit scoring models. Most lenders use the FICO credit scoring model, though some lenders use the VantageScore scoring model, and there are multiple versions of each depending on which of the three major credit bureaus (Equifax, Experian, and TransUnion) supply the underlying credit reports. The score you access through CreditWise is from the TransUnion VantageScore 3.0 scoring model, and even though it is unlikely to be the scoring model your lender uses, it can give you an accurate understanding of your credit health.

Which credit score is most important when buying a house?

Most mortgage lenders rely on the FICO model, which is different from the TransUnion VantageScore 3.0 scoring model CreditWise uses. Check with your lender to confirm which scores they review and how they handle multiple credit scores, as each lender may vary.

What if there are multiple borrowers on the mortgage application?

Each lender may have a different process when reviewing applications for multiple borrowers. If you’re applying for a home loan with someone else (like a spouse), ask your lender for information. In some cases, the lower of your two scores as determined by the lender’s application process may be chosen.

What is an ideal credit score for a mortgage?

Generally speaking, the higher your score, the better—but you don’t need a perfect score. Scores in the Good to Excellent range may qualify you for better loan rates and terms.

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