When you're considering buying a home, your credit score plays a crucial role. Think of it as your financial report card—lenders use it to determine if you qualify for a mortgage and which loan options might be available to you. As the Mortgage Report explains:

"Good credit scores indicate to lenders that you have a history of responsibly managing your debts. The higher your score, the better your chances of securing a mortgage." However, many buyers tend to overestimate the minimum credit score required to buy a home. According to a report from Fannie Mae, only 32% of consumers accurately understand what lenders typically require. This means nearly two-thirds of people are unsure.

To give you a general idea, Experian offers some guidance:

“The minimum credit score needed to buy a house can range from 500 to 700, depending on the type of mortgage loan and the lender. For a conventional mortgage, most lenders require a minimum credit score of 620.” In other words, the requirements can vary. So even if your credit score isn’t perfect, you still have options. As FICO points out:

“While many lenders use credit scores like FICO Scores to inform their lending decisions, each lender has its own criteria and acceptable risk level. There isn’t a single 'cutoff score' that all lenders use, and they often consider additional factors.” If your credit score needs a boost, don’t worry—there are steps you can take to improve it. Experian suggests a few key strategies:

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   Pay Your Bills on Time: Lenders want to see that you can consistently make payments on time, whether it’s for credit cards, utilities, or other bills. This reliability is a positive signal to lenders.

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   Pay Off Outstanding Debt: Reducing your debt can lower your overall financial risk in the eyes of lenders and improve your credit utilization ratio (the amount of credit you're using compared to your total limit). A lower utilization ratio is seen as a good sign.

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   Limit Credit Applications: While it might seem like a good idea to open more credit cards to build your score, it’s best to avoid applying for too much credit at once. Multiple new applications can lead to hard inquiries, which can temporarily lower your score.

Bottom Line

Your credit score is a key factor when buying a home, but even if it’s not perfect, you still have options for homeownership. Working with a trusted lender can provide you with more detailed information on how your credit score will impact your mortgage options.