When Buying a House, What Credit Score Do They Look At?

Buying a house is likely one of the biggest financial decisions you’ll ever make. And your credit scores play a major role in determining whether you can get approved for a mortgage and the terms of your loan. So when you’re preparing to buy a home, one of the key questions is: What credit scores do mortgage lenders look at?

The short answer is that most mortgage lenders primarily consider your FICO credit scores when evaluating your application. Specifically, they tend to look at older FICO Score versions from the three major credit bureaus – Experian, Equifax and TransUnion.

However, changes are coming in 2025 that will require lenders to look at newer FICO and VantageScore versions. This could significantly impact the credit scores used for mortgage lending.

Below we’ll explore in more detail

• The key credit scores mortgage lenders use today
• Upcoming changes to required mortgage credit scores
• Minimum credit scores for different mortgage types
• Other factors lenders consider beyond your scores
• How to improve your credit before applying for a mortgage

What Credit Scores Do Mortgage Lenders Use Today?

When you apply for a mortgage today in 2024, there’s a very good chance the lender will pull your FICO® Scores 2, 4 and 5 to evaluate your creditworthiness

Here’s a quick rundown of what these scores represent:

• FICO® Score 2 – Based on your credit report from Experian
• FICO® Score 4 – Based on your credit report from TransUnion
• FICO® Score 5 – Based on your credit report from Equifax

The reason lenders gravitate towards these particular FICO® Score versions is that the most common type of mortgage – the conventional loan – is often sold to Fannie Mae and Freddie Mac. These are government-sponsored enterprises that buy mortgages from lenders and sell them to investors.

Fannie Mae and Freddie Mac require lenders to provide these specific FICO® Scores when selling them a mortgage. So lenders align their underwriting standards with these requirements.

Many lenders will look at your middle score of the three FICO® versions listed above. If you’re applying for a mortgage with a partner, they may look at the lower middle score of the two applicants.

New Credit Score Requirements Start in 2025

In October 2022, a major change was announced regarding credit score requirements for mortgages.

The Federal Housing Finance Agency (FHFA) revealed a plan to start requiring newer FICO and VantageScore versions on all mortgages sold to Fannie Mae and Freddie Mac.

Here’s an overview of what’s changing:

• Starting in Q4 2025 – Lenders can ONLY report FICO® 10 T and VantageScore® 4.0 credit scores.

• During a transition period – Lenders must provide the classic FICO® Scores 2, 4 and 5 used today, along with the newer FICO® 10 T and VantageScore® 4.0.

The transition period will likely begin sometime in 2024. So within the next couple years, mortgage lenders will be looking at these newer credit scoring models.

Both FICO® 10 T and VantageScore® 4.0 can analyze trends in your credit history and consider new factors like rental payments – which the older scores don’t. This change has the potential to significantly impact who gets approved and the mortgage rates offered.

Minimum Credit Scores by Mortgage Type

While it’s good to aim for the highest scores possible, each type of mortgage has a minimum credit score requirement to qualify:

• Conventional – 620 minimum credit score
• Jumbo – 700 minimum credit score
• FHA (with 10% down) – 500 minimum credit score
• FHA (with under 10% down) – 580 minimum credit score
• VA – No official minimum but most lenders require 620+
• USDA – 580 minimum credit score

These are the baseline requirements set by the government agencies and programs backing these loans. But individual lenders may choose to set higher minimum credit scores.

For example, the VA itself doesn’t require a minimum score. But many lenders that offer VA-backed mortgages still demand a credit score of at least 620 to 660 before approving borrowers.

So while you may meet the minimums above, your lender’s requirements could be higher. Checking their credit score criteria is important.

Factors Beyond Your Credit Scores

While your credit scores are very important, lenders do look at other factors when underwriting mortgage applicants. Here are some of the key ones:

• Credit history – Foreclosures, bankruptcies, collections, disputes and other negative marks can override high scores.

• Income/employment – Proof of stable income is required. Lenders want 2 years of consistent employment or income sources.

• Debt-to-income ratio (DTI) – Your total monthly debt divided by gross monthly income. Most want this below 50%.

• Down payment – Lenders prefer larger down payments, typically at least 20% of the home’s value.

• Loan-to-Value (LTV) ratio – Compares loan amount to the home’s value. Lower LTVs are better for approval odds.

• Reserves – Liquid assets to cover mortgage payments if you lose income. Minimums range from 2 to 12 months.

The bottom line – Excellent credit scores certainly help. But meeting all the above criteria is also crucial for getting approved and securing the best possible mortgage loan terms.

How to Improve Your Credit Before Buying a House

If your credit scores aren’t quite where you want them to qualify for a mortgage, here are some tips to improve them:

• Pay all bills on time – Payment history is usually the biggest factor in your scores. Stay current on everything.

• Lower credit card balances – High balances hurt your credit utilization ratio. Pay down balances to under 30% of limits.

• Hold off new credit applications – New inquiries and accounts can drop your scores if you apply for too much new credit before applying for a mortgage.

• Check for errors on your credit reports – Incorrect information can negatively impact your scores. Dispute any errors with the credit bureaus.

• Become an authorized user – Being added as an authorized user on an account with good payment history can help.

• Limit credit checks – Frequently checking your own scores can result in hard inquiries that lower your scores.

• Consider credit-builder products – Secured credit cards and credit-builder loans can establish positive payment histories.

• Let time pass – Negative marks lose their impact as they age. Allow time for your scores to recover from past issues.

Monitoring your credit scores in the months leading up to buying a house can help you know where you stand. Just beware that many free credit scores aren’t the same versions lenders actually use.

The Takeaway

When applying for a mortgage, most lenders today look at your classic FICO® Scores – specifically versions 2, 4 and 5 from Equifax, Experian and TransUnion.

But changes are imminent, with lenders soon required to consider newer FICO® 10 T and VantageScore® 4.0 scores.

Your credit scores aren’t the only factor lenders evaluate. But maintaining scores above each mortgage type’s minimum requirements, along with meeting other qualifying criteria, will put you in the best position for getting approved and scoring the most favorable loan terms.

Monitoring your credit reports and scores, plus taking steps to improve them in the months and years before buying a house, is one of the smartest financial moves you can make.

When applying for a mortgage, lenders typically use the middle or median credit score from the three major credit bureaus (Equifax, Experian, and TransUnion) to determine your creditworthiness and the interest rate you’ll receive.

To purchase a $300,000 house, the minimum credit score typically needed is 620 for a conventional loan. However, some loans like FHA loans may have lower minimums, like 580 with a 3.5% down payment, or even 500 with a 10% down payment.

To get a $30,000 personal loan, you generally need a credit score of 670 or higher to qualify for the best interest rates and terms.