What is a Good Credit Score to Buy a House? Understand Your FICO Score
Wondering what is a good credit score to buy a house? You’re not alone! This article teaches you everything you need to know about how credit impacts your ability to purchase a home. Let’s dive in!
What is a FICO Score?
Your FICO® Score is a three-digit number (ranging from 300 to 850) representing your creditworthiness. Developed by the Fair Isaac Corporation (FICO), this score helps lenders evaluate the risk associated with lending you money. The higher your FICO Score, the lower your perceived risk of defaulting on loans.
Important Note: There are multiple versions of FICO Scores, each used for different purposes. Many people think the score their credit card company shows them is the score that lenders review - this is not the case.
Why Do You Have Multiple FICO Scores?
You actually have multiple FICO scores because:
Different Credit Bureaus: The three major credit bureaus—Equifax, Experian, and TransUnion—collect information independently. Creditors report voluntarily, so each bureau might have slightly different information.
Different Purposes: Different lenders use different versions of FICO scores tailored specifically for mortgage, auto, or credit card lending - so knowing what is a good credit score to buy a house means understanding which version your lender will actually us
Understanding Credit Bureaus vs. Credit Scores
It's common to confuse credit bureaus with credit scores. Here's the difference:
Credit Bureaus (Equifax, Experian, TransUnion): These are organizations that collect, store, and manage your credit data. They compile your credit history into reports but do not calculate your score.
Credit Scores (FICO): Your scores are calculated by another company, FICO, based on the data in your credit reports.
How Credit Scores Affect Loan Eligibility and Interest Rates
What is a good credit score to buy a house depends significantly on the type of mortgage you're getting. Here’s how different loans are impacted by credit scores:
Conventional Loans (Fannie Mae and Freddie Mac): Typically require a minimum FICO score of around 620.
Jumbo Loans: Loans exceeding conventional limits generally require higher scores depending on the property and the lending institution.
Even a small difference in your credit score can notably impact your interest rate. For example, moving from a score of 719 to 720 could result in a quarter-point (.25%) better rate on a Fannie Mae or Freddie Mac loan.
Checking Your Credit Reports and Scores
Reviewing your credit is one of the best first steps in figuring out what is a good credit score to buy a house, and how close you are to reaching it.
Free Credit Reports
By federal law, you're entitled to a free credit report from each bureau every 12 months. These reports contain your full credit history but not your scores.
Get Your Free Credit Reports: Visit AnnualCreditReport.com.
Getting Your Scores
To obtain your FICO scores, you'll generally need to pay a fee:
MyFICO.com provides authentic FICO scores, including the versions mortgage lenders typically use.
Checking your own score is considered a "soft inquiry" and does not negatively affect your score.
FAQS
Does shopping around for a mortgage or auto loan hurt my credit?
No. FICO Scores ignore mortgage and auto loan inquiries made within a 30-day period. This allows you to shop around without harming your score.
Why do I have three different scores?
Because each bureau may hold slightly different information about your credit, your scores may vary.
Can my lender provide me a copy of my credit report?
Generally, no. If your application is denied due to credit reasons, you can obtain a free copy directly from the credit bureau involved.
If I plan to purchase a home soon, when should I check my credit?
Immediately. Early review allows ample time to correct errors or take steps to improve your score. Credit improvements usually require time.
How do I get my FICO score?
You can obtain your FICO score directly from MyFICO.com.
How do I access my free annual credit reports?
Use the official federally authorized website: AnnualCreditReport.com.
What is a good credit score for a mortgage?
It depends on the type of loan. Fannie Mae and Freddie Mac require a score of 620+. For jumbo loans (loans that exceed the Fannie Mae Freddie Mac) limit, some lenders may require higher scores. There are other types of loans, such as VA and FHA loans that have other credit requirements that can be lower than Fannie Mae or jumbo loans.
Your credit score is one piece of the puzzle
Understand the rest of the picture by getting in touch with an expert as soon as possible! Your licensed real estate agent will connect you with top notch mortgage brokers.
Set up a totally free, no obligations consultation call with a real estate expert today and chart your course toward your dream home.
Please note Kristen Shaker is a licensed real estate salesperson not a mortgage broker. She will always direct you to a qualified mortgage professional to discuss the specifics of your situation as it relates to your ability to secure financing.
