Home Buying » Home Buying Guides » How Credit Score Affects Your Mortgage Rate
Advertiser Disclosure

This website is an independent, advertising-supported comparison service. The product offers that appear on this site are from companies from which this website receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). This website does not include all card companies or all card offers available in the marketplace. This website may use other proprietary factors to impact card offer listings on the website such as consumer selection or the likelihood of the applicant’s credit approval.

This allows us to maintain a full-time, editorial staff and work with finance experts you know and trust. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impacts any of the editorial content on The Smart Investor. While we work hard to provide accurate and up to date information that we think you will find relevant, The Smart Investor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof.

Learn more about how we review products and read our advertiser disclosure for how we make money. All products are presented without warranty.

How Credit Score Affects Your Mortgage Rate

A low credit score could make it difficult for you to get a great rate on your mortgage. That means you’ll spend more than someone with good credit. Keep in mind, even a small amount of change in interest adds up - from 4.5% to 4.25% could be a huge difference over 30 years. So how exactly your score impacts mortgage rate? Here's all you need to know.

You can trust the integrity of our unbiased, independent editorial staff. We may, however, receive compensation from the issuers of some products mentioned in this article. Our opinions are our own.

How Lenders Set Your Mortgage Rate

The risk that you present affects your interest rate. If you’re a bigger risk you’ll have a higher rate. Note that your credit score is going to determine more than whether you get the mortgage or not. It also affects your risk and how likely you are to default. If you have a higher score the lenders believe you’re a lower risk. That means you get a lower interest rate.

Having a higher credit score means you’re a responsible person. It means you make payments on time. It means you keep balances low and it means you don’t fall into credit traps.

Lower credit scores show that you have a higher risk of not making payments. It means you may keep high balances or that you might have major problems on your report.

What Score Do You Need For a Mortgage?

When it comes down to it there’s no single score that makes you good. Having a score higher than 660 is generally a good place. You’ll need to have a house that’s within your budget and something that really works for you. If the loan you’re going for makes sense you should be all right.

If you don’t have at least a 660, however, you could be in trouble. You may still qualify, but it’s difficult to say. Someone under this score could have a subprime mortgage. That means you have to have good income and assets. Then, you may still be able to get the mortgage with a low score.

At the absolute bottom, you’ll need a 500 FICO score to get a mortgage. Having someone with a lower score will likely not get approved. Someone that has lower may get something, but it’s not a good idea. It’s generally better to focus on getting your score bumped up before you get a loan.

Credit Score Ranges Basics

How Can I Get a Low-Interest Rate?

Keep in mind that there’s no specific score that gets you a certain rate. If you fit well into the highest standards you’ll be better off. If you have a 20% down payment and savings and plenty of income, you could be off to a good start. You’ll want to fit the criteria necessary.

If you have a score over 720 you’re considered excellent. This makes you most likely to get a low-interest rate. It also makes it more likely you’ll get great terms. As your score moves down your interest rate moves up. That becomes even more important as you get down into the 600’s. A difference between 635 and 750 could mean up to 1% difference in rate.

FICO score Rate
Excellent (740-850) lowest rate available
Very good (700-740) lowest rate available + 0.2%
Good + (675-699) lowest rate available + 0.5%
Good – (650-674) lowest rate available+ 0.75%
Moderate (620-650) lowest rate available+ 1%
Poor (580-620) lowest rate available + 1.5%
Very Poor (500-580) Unlikely to getting approved


Something called ‘loan-level pricing’ is about your credit score scale. It means that every 20 points your score moves your rate changes. Going down a level means an increase in your overall cost. The opposite happens when you go up a level.

How Do Government Programs Work?

When it comes to getting approved for government programs you want to look at different credit scores and requirements.

FHA Loans: Not as great credit scores mean that you may need help. For those with a score between 500 and 579 you may be able to get approved for an FHA loan with 10% down. On the other hand, a 580 score or higher could enable you to get a loan with only 3.5% down.

VA Loans: For the Veterans Affairs Department, loans are only for those who are active or veteran military personnel. There isn’t a minimum score from the government, but the lenders that are used will generally prefer a score of at least 620.

USDA Loans: The Department of Agriculture helps those who want to make a purchase in a rural area. In most instances, you’re going to need a score of at least 640. Depending on the rest of your credit score, however, you could have a lower score.

What Can I Do To Improve My Score?

Every credit reporting bureau has their own method to create a score. It all depends on a number of different factors.

  • Payment History – If you have late payments or accounts that are overdue they go in this category. Bankruptcies and charge off do as well.
    Credit Utilization – This is how much debt you have compared to how much credit you have available. It should be 35% or less. When it comes to mortgages, yout DTI (debt to income ratio) is also an important factor.
  • Credit History – This is about the length of time you’ve had accounts. The longer they’ve been there the better for you.
  • New Requests – How often have you applied for credit? Keep in mind that when you check your score it doesn’t affect anything.
  • Credit Mix – Having a credit mix is better for you, like loans and credit cards.

How can you increase your score?

  • Pay all of your debts on time. This is the most important factor of your credit score. It shows that you can be trusted.
  • You need to keep your credit utilization low, at least under 35% and preferably under 30%. If you stay lower you’re better off.
  • Mix up your credit accounts. You want to show you have the ability to handle different types of credit.
  • Maintain your cards and accounts even longer. You’ll want to have the longest history you can but with good records. You want to have a good standing.
  • Reconsider new accounts. If you open a lot of accounts it could reflect badly on your score, so think twice.

How Long Does it Take to Increase Your Score?

There are a number of things that will affect your score. Things like your current score and the reason for it will affect it. If you don’t have a credit history you can increase your score quickly. It may take only months to get you there. For those with a lot of debt paying off the debt can affect scores quickly. Someone with missed payments or bankruptcy can require a longer timeline.

Bringing your score up entirely could mean a long time. Keep in mind that you could be at this for a long time. How bad your current situation is will be the deciding factor. You’ll need to look at how serious things are and then what to do. It’s like being ill, where some things could be resolved quickly and others take a much longer time to start seeing results.