How Credit Scores Affect Your Mortgage: Approval, Pricing and Insurance

Your credit score is one of the first things I look at with a new buyer, and it's one of the most misunderstood. People tend to think of it as a pass/fail grade. It's really more like a dial: it affects whether a lender can approve you, what your loan costs, whether you'll pay mortgage insurance, and sometimes how much you need for a down payment. This is how credit scores affect your mortgage, in plain English, and what you can do about yours over time.

The CFPB describes a credit score as a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports. Companies use scores to decide whether to extend mortgages, credit cards, auto loans and other credit, and the scores also influence the interest rates and credit limits borrowers get.

Per the CFPB, scoring models consider things like:

What credit score do I need to buy a house?

It depends on the loan program and the lender. Fannie Mae's automated underwriting doesn't set a minimum score, but manually underwritten loans do, and lenders can have their own. For FHA scores, see FHA vs. conventional.

Does a higher credit score lower my mortgage costs?

Often, yes, though not always by the same amount. The CFPB lists your credit score along with your down payment, the lender and market conditions as things that influence your borrowing costs. I can show you the difference using your real numbers.

Where do I get my credit reports for free?

At AnnualCreditReport.com, the only site authorized by federal law for your free reports, per the FTC. You can request one from each of the three bureaus every 12 months, and the bureaus also offer free weekly checks.

What should I do if there's an error on my report?

Dispute it in writing with the credit reporting company and the company that supplied the information, and include supporting documents. The CFPB says furnishers generally must investigate and respond within 30 days.

Can you fix my credit quickly?

I can't promise a score change, since it depends entirely on what's in your file. What I can do is review your reports and build a step-by-step plan, and I'll tell you honestly if it's better to wait.