However, many buyers still get approved with scores below that. And if your score is above 740, you'll save serious money on interest.

Your credit score affects whether you qualify for a mortgage, what interest rate you'll pay, and how much house you can actually afford. Here's everything you need to know about credit scores and home buying.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

Quick Reference: Credit Scores for Home Buying

Save this breakdown for when you're ready to apply:

• 780+: Best mortgage rates available
• 700–779: Great rates with lots of loan options
• 620–699: Qualify for most conventional loans
• 580–619: FHA loans and some VA loans work
• 500–579: FHA loans with 10% down payment
• Below 500: Focus on improving credit first

Why Your Credit Score Actually Matters

Mortgage lenders check your credit score to determine one thing: will you repay them?

Your score indicates how you've managed debt in the past. A higher credit score means you probably pay bills on time and don't max out credit cards. A lower score may indicate you've missed payments or struggled with debt.

Here's where it gets expensive. A lower credit score doesn't just make approval harder. It costs you money every single month. Your credit score might be the most expensive number you've never really thought about.

Let's say you're buying a $300,000 house with 20% down. That's a $240,000 mortgage.

With a 760 credit score, you may qualify for a 6.89% interest rate. Your monthly payment (minus taxes and insurance): $1,579.

With a 640 credit score, your rate jumps to 7.45%. Your monthly payment: $1,670.

That's $91 more every month. Over 30 years, you'd pay roughly $40,750 extra in interest just because your score was 120 points lower.

It really puts the general "620 is a good credit score" advice into perspective, doesn't it?

Minimum Credit Scores by Loan Type

Different loans have different rules. Here's what you actually need to qualify.

Conventional Loans: 620 Minimum

Most home buyers use conventional loans. The government doesn't back these loans. Lenders typically require a minimum credit score of 620.

But here's the catch: 620 gets you in the door, not the best deal.

If your score hits 740 or higher, you'll typically qualify for the lowest interest rates. That's where the real savings start. The difference between 620 and 740 can save you $30,000+ over the life of your loan.

Conventional mortgages work best when you have good credit and at least 3% to put down. If you can manage 20% down, you skip private mortgage insurance and save even more monthly.

FHA Loans: 500–580 Minimum

The Federal Housing Administration backs FHA loans. They're designed for buyers who can't qualify for conventional loans.

Here's how the credit requirements break down:

• Credit score 580 or higher: Put down just 3.5%
• Credit score 500–579: Need to put down 10%

FHA loans are easier to get approved for, but they come with a cost. You'll pay mortgage insurance for the entire life of the loan unless you put down at least 10%. That insurance can add $200+ to your monthly payment. With a conventional loan, you can get the insurance requirement taken of once you hit 20% equity.

Most lenders won't go below 580, even though the FHA technically allows a credit score as low as 500 because they want to minimize their risk. Shop around if your score is between 500–579. Some lenders specialize in lower credit scores.

VA Loans: Usually 620

VA loans are available to veterans, active military members, and some surviving spouses. The Department of Veterans Affairs doesn't set a minimum credit score. But individual lenders do. Most want to see a score of 620 or higher.

The upside is that VA loans require no down payment and no mortgage insurance. That's huge. For a veteran with good credit, VA loans often beat every other option.

If you're eligible for a VA loan but your credit score is below 620, consider lenders that specialize in VA loans. Some will work with scores as low as 580 if your other financials are solid.

USDA Loans: Usually 640

USDA loans help low- to moderate-income buyers purchase homes in rural and suburban areas. Like VA loans, USDA doesn't set an official minimum score.

Most lenders want 640. Some will consider 620 if you have a strong income and low debt.

USDA loans require no down payment, which is a great benefit. However, you must meet income limits and purchase in an approved area. Check if your target neighborhood qualifies before getting too excited about USDA loans, but a surprising number of areas you normally wouldn't think of as "rural" qualify.

Jumbo Loans: 700+ Minimum

Jumbo loans exceed the conforming loan limit (around $806,000 in most areas). You're borrowing a lot, so lenders want proof you can handle it.

Most require a credit score of 700 or higher. Many prefer 720 or higher.

You'll also need a larger down payment (typically 10–20%), a lower debt-to-income ratio, and significant cash reserves. Jumbo loans aren't for buyers with shaky credit or tight budgets.

How Much Does Your Score Really Cost You?

Let's look at real numbers with the help of Experian, one of the three major credit bureaus.

Here's what different credit scores would actually cost you on a $350,000 mortgage loan in January 2025 (with 20% down, so the house is worth $437,500, and not factoring in taxes/insurance):

Credit Score: 780

• Estimated rate: 7.07%
• Monthly payment: $2,345.04
• Total interest over 30 years: $494,212.97

Credit Score: 740

• Estimated rate: 7.26%
• Monthly payment: $2,389.99
• Total interest over 30 years: $510,396.90
• Cost of lower score: $16,183.93

Credit Score: 680

• Estimated rate: 7.55%
• Monthly payment: $2,459.25
• Total interest over 30 years: $535,328.23
• Cost of lower score: $41,115.26

Credit Score: 620

• Estimated rate: 7.89%
• Monthly payment: $2,541.39
• Total interest over 30 years: $564,899.63
• Cost of lower score: $70,686.66

That gap between 620 and 780 is over $70,000 in extra interest. That's a new car. College tuition for your kid. A serious chunk of retirement savings.

A credit score boost from 620 to 680 could save you almost $30,000. Is it worth spending a few months improving your credit first? Probably.

Your Score Isn't Everything Lenders Check

Good credit helps, but lenders consider your entire financial picture.

Debt-to-Income Ratio (DTI)

This compares your monthly debt payments to your monthly income. Most lenders require a debt-to-income ratio of 43% or lower. Some prefer 36%.

Here's how to calculate it: Add up all your monthly debt payments (credit cards, car loans, student loans, etc.). Divide by your gross monthly income (not your take-home pay). Multiply by 100.

If you make $6,000 per month and have $2,000 in debt payments, your DTI is 33%. That's pretty good.

High DTI can sink your mortgage application even with excellent credit. Pay down debt before applying if you're close to the limit.

Down Payment Size

A bigger down payment makes lenders happy. You're borrowing less, which means less risk for them. You also have more equity to lose, so you're more likely to prioritize your mortgage payments.

Put down 20% on a conventional loan, and you skip private mortgage insurance. That saves you $100–$200+ per month right away.

If you can't manage 20%, many loans accept 3–5% down. Just know you'll pay mortgage insurance and possibly higher interest rates. Don't forget to look into down payment assistance programs!

Employment History and Income

Lenders want to see stable income. Two years at the same job (or in the same field) looks good.

Switching jobs right before applying can raise red flags. Lenders worry you won't have a steady income to make payments. If you're considering a job change, wait until after you've closed on the house.

Cash Reserves

How much money do you have left after making the down payment and covering the closing costs?

Lenders prefer to see 2–6 months of mortgage payments saved up. It shows you can handle the payment even if something goes wrong.

Low reserves with low credit are tough. You may still be denied, even if you technically qualify.

Can You Buy a House With Bad Credit?

Let's define "bad credit" first. Generally, anything below 620 is considered subprime. Below 580 is poor credit territory.

Can you still buy a house with bad credit? Sometimes.

FHA loans accept scores as low as 500 if you can put 10% down. That's your main option with bad credit.

But here's the reality: bad credit costs you. A lot.

The interest rate difference between 580 and 680 might cost you $40,000+ over the life of your loan. You'll also pay higher mortgage insurance with FHA loans when your credit is lower.

Some buyers decide to keep renting and improve their credit first. Others need to buy now (job relocation, growing family, lease ending).

Real Talk: Should You Wait?

Buy now if:

• Rent costs more than a mortgage payment would
• You're relocating for work and need to settle down
• Your family situation demands more space immediately
• Home prices in your area are rising faster than you can save

Wait and improve your credit if:

• You can boost your score 40+ points in 6–12 months
• Waiting would save you $20,000+ in interest
• Your debt-to-income ratio is too high right now
• You don't have enough saved for closing costs and reserves

Nobody can make this call but you. Just go in with eyes open about what bad credit actually costs.

Boost Your Score Before You Buy

Here's how to improve your credit fast. Some of these tactics work in weeks, not months.

Check Your Credit Report First (Do This Today)

You can't fix problems you're unaware of.

Get your free credit reports from AnnualCreditReport.com. Check all three bureaus: Experian, Equifax, and TransUnion. They'll probably have different numbers because of their different scoring systems. Lenders usually take the middle score.

Look for errors. Report paid bills showing as unpaid or accounts that aren't yours immediately.

About 20% of borrowers have an error on at least one of their credit reports. Fixing them can quickly boost your score. One resolved dispute could massively jump your score without you having to do anything else.

Pay Bills On Time (The Biggest Factor)

Payment history makes up 35% of your FICO score, which is what most lenders use to evaluate your credit. Nothing else matters more.

One late payment can drop your score 60–100 points. It stays on your report for seven years.

Set up autopay for the minimum payment on every account. Even if you pay more manually, autopay ensures you never miss a payment by accident.

If you’re currently late on a bill, pay it immediately. The damage is done, but catching up stops it from getting worse.

Pay Down Credit Cards Fast

Credit utilization is 30% of your FICO score. This measures how much of your available credit you're using.

If you have a $10,000 total credit limit across all cards and you owe $4,000, your utilization is 40%. That's too high.

Get it under 30%. Under 10% is even better.

Pay the cards that are closest to their limits first. If you have one card maxed out and another at 20%, attack the card with the higher percentage first. Lenders hate seeing maxed cards.

If you can’t pay off your cards completely, ask for credit limit increases. The same balance, with a higher limit, equals lower utilization. Your score can improve without paying off debt.

Don't Apply for New Credit

Every time you apply for credit, it creates a hard inquiry on your report. These drop your score a few points each.

More importantly, new accounts signal to lenders that you might be stretching yourself too thin.

Stop applying for new credit at least six months before buying a house. No new car loans, credit cards, personal loans, or store credit.

If you already have a hard inquiry, it is what it is. Just don't add more.

One exception: shopping around for the best mortgage rates! Lenders know you're only going to buy one house, so it doesn't make sense to treat every mortgage-related check as a potential new, separate debt. You get a 45-day window from your first mortgage-related credit check where all other mortgage-related checks are bundled together, so everything only counts as one hard inquiry.

Keep Old Cards Open

Closing credit cards seems smart. Less temptation to spend, right?

Wrong move for your credit score.

When you close a card, you lose that credit limit. Your utilization ratio goes up instantly. Additionally, you may lose your oldest account, which can shorten your credit history (worth 15% of your FICO score).

Keep old cards open, even if you never use them. Cut them up if you must. Just don't close the accounts.

The exception: if an old card has a high annual fee you can't justify, closing it might make sense. But leave free cards open.

Deal With Collections and Charge-Offs

Old collections and charge-offs can still hurt your score, even if they're years old.

If you have money to pay them off, try negotiating a "pay-for-delete." Some collectors will remove the entry from your credit report in exchange for payment.

Get it in writing before you pay. No promises, no payment.

If you can’t get pay-for-delete, paying off collections still helps a little. Paid collections appear more favorable than unpaid ones, even if both are negative marks.

Prioritize recent collections first. Older ones (5+ years) have less impact on your score.

Your 90-Day Credit Boost Plan

Ready to improve your credit? Follow this timeline:

Week 1–2: Get the facts

• Pull credit reports from all three bureaus
• Check your scores
• Identify errors and dispute them immediately
• List all debts with balances and interest rates

Week 3–4: Set up systems

• Set autopay for minimum payments on everything
• Create a debt payoff plan targeting high-utilization cards
• Stop applying for any new credit
• Calculate your debt-to-income ratio

Month 2: Attack the numbers

• Pay down credit cards, focusing on the highest utilization first
• Check if any credit limit increases are available
• Continue making every payment on time
• Review credit reports to see if disputed errors are resolved

Month 3: Final prep

• Recheck scores to see improvement
• Verify all payments remain current
• Avoid any new credit or big purchases
• Gather documents for pre-approval

After 90 days, you should see:

• 20–60 point score increase (if you had errors or high utilization)
• Lower debt-to-income ratio
• Clean payment history for three months
• Ready to shop for pre-approval with confidence

What About Co-Signers?

A co-signer with good credit can help you qualify when your credit isn't strong enough.

The co-signer's income and credit score get factored into the application. This can lower your interest rate and increase how much you can borrow.

But here's what everyone needs to understand: co-signing means equal responsibility.

If you miss payments, your co-signer's credit will also be affected. If you default completely, they're on the hook for the full loan. Lenders will come after them for the money.

This isn't a favor to ask lightly. Have an honest conversation about the risks before asking someone to co-sign on a loan.

Consider these alternatives first:

• Wait and improve your credit yourself
• Look at FHA loans if you qualify
• Save for a larger down payment to offset low credit
• Buy a less expensive house you can afford with your current credit

Co-signing works for some families. Just make sure everyone knows what they're signing up for.

Getting Pre-Approved: What to Expect

Pre-qualification and pre-approval are two different things. Pre-qualification is an estimate of what you might be approved for based entirely on what you tell them. Pre-approval means a lender has seen your documents, checked your finances, and agreed to lend you a specific amount.

Pre-approvals hold weight with home sellers—it means you're not likely to have your financing fall through at the last minute and ruin the sale.

Here's what happens: the lender runs your credit (a hard inquiry), verifies your income and employment, and checks your debt-to-income ratio. Then they give you a letter stating how much they'll lend you. It can often be done the same day; if not, it typically only takes two or three days.

The shopping window is important. Multiple mortgage inquiries within 14–45 days (depending on the credit scoring model; 14 is used by some older models) are counted as a single hard inquiry. This lets you shop for the best rate without tanking your score.

Apply with 3–5 lenders during a two-week period. Compare rates and fees. Pick the best deal.

Don't space out applications over several months. That creates multiple hard inquiries, each of which can drop your score.

Documents you'll need:

• Two years of tax returns
• Recent pay stubs (last 2 months)
• Bank statements (last 2–3 months)
• W-2s or 1099s
• List of debts and monthly payments
• Explanation for any credit issues

Get these ready before you start applying. Faster pre-approval means you can make stronger offers when you find the right house.

Common Credit Score Mistakes Homebuyers Make

These mortgage mistakes sink applications or cost buyers thousands in extra interest.

Closing Credit Cards Before Applying

You think you're being responsible. Lenders notice a spike in your credit utilization ratio and a shortening of your credit history. Your score drops 20–40 points. Suddenly, you don't qualify or you get a worse rate.

Keep cards open through closing.

Making Big Purchases During the Process

You got pre-approved. Great! Time to buy furniture for the new house, right?

Wrong. Lenders recheck your credit right before closing. New debt changes your debt-to-income ratio. Your mortgage approval could disappear days before closing.

Avoid buying furniture, cars, appliances, or any other major item on credit until after closing day.

Changing Jobs Right Before Buying

Lenders love stable employment. Changing jobs raises questions about income stability.

If you're considering switching jobs, wait until after you've closed. The only exception: staying in the same field with higher pay and a confirmed offer letter might be okay. Check with your lender first.

Missing the Connection Between Credit and Rates

Too many buyers focus only on qualifying. They forget that their credit score determines their interest rate.

You could jump into your purchase as soon as you hit 620, but waiting for a 40-point score increase could save you more than $24,000 over the life of your loan. That's worth delaying your purchase by a few months.

Not Checking Reports for Errors

Disputes usually take 30–45 days to resolve. If you wait until you're ready to apply, errors might sink your application.

Check your credit reports 6–12 months before you plan to make a purchase. Fix errors early.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

Your Credit Score Matters, But It's Not Everything

Most home loans have a minimum credit score requirement of 620. FHA loans accept a credit score of 580 (or 500 with a larger down payment). The higher your score, the better your interest rate and the more money you save.

But a credit score is just one piece of the puzzle. Lenders also verify your income, debt-to-income ratio, employment history, and the size of your down payment.

If your credit isn't perfect, you still have options. FHA loans help buyers with lower scores. VA and USDA loans offer paths for eligible buyers. Co-signers can boost weak applications.

The smartest move is to check your credit now. Fix errors. Pay down high-balance cards. Wait a few months if a score boost would save you serious money.

Your credit score might be just a number, but it's a number that affects your monthly payment for 30 years. Make it count.

Ready to start the home-buying process? Work with an agent who knows Tennessee lending and can connect you with lenders who specialize in your credit situation. They'll help you find the right loan for your score and save you money in the process.