Credit Scores & Homeownership

As Benjamin Franklin famously said way back in 1789, “In this life, nothing is certain except death and taxes.” Perhaps we can take that one step further and say nothing in this life is certain without a credit score. It seems like everything big and fun we want to do or buy is wrapped up in that one three digit number, but it can be really confusing for those of us that don’t really understand what it is or does. So, really, what is a good credit score when it comes to buying a home? 

Your credit score, also called a credit rating or referred to as your FICO score, is a numerical representation of your financial history. A high FICO score shows that you have a positive history of repaying debts on time and at the agreed upon amounts. The lower your score, the more dings you have on your report. Lenders look for a higher score as a guarantee that you’ll repay your mortgage loan as promised. 

The Breakdown

As shared by Realtor.com: The typical credit score range can fall anywhere from 300 to 850, with 850 being a perfect credit score. While each creditor might have subtle differences in what they deem a good or great score, in general an excellent credit score is anything from 750 to 850. A good credit score is from 700 to 749; a fair credit score, 650 to 699. A credit score lower than 650 is deemed poor, meaning your credit history has had some rough patches.

Credit score requirements vary between lenders but generally speaking, if you’re north of 700, you’ll qualify for a mortgage. Anything below 700 is up to the lender’s discretion and while you may not be denied, an approval may come with higher interest rates.

As you approach the homebuying process and find yourself with a less than desirable credit score, don’t lose faith! There are things you can do to improve your credit score, like paying off credit cards, keeping your utilization below 30%, and avoiding applying for any new lines of credit.