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Best credit score for buying a house

How your credit score affects your home buying power

Resources / January 31, 2022

Your credit score is a massive part of your financial profile. With good credit, you have a world of opportunity in front of you. You’ll have an easier time applying for loans, making larger purchases, and you can even receive better rates on insurance!

All of these factors impact your home buying power as well. The team at First Mortgage Direct understands how your credit score affects your home buying ability, and we’re adept at working with potential borrowers with a variety of financial situations. 

Credit is anything but straightforward, so it’s difficult to determine what may be the best credit score for buying a house. In this blog, our mortgage lending experts explain more about what credit is, how it affects your home buying journey, and how to accomplish your goals with your personal credit score in mind. 

What is a credit score? 

Your credit score is essentially a grade on your financial profile. It predicts how likely you are to pay back a loan on time using information from your past financial history that’s kept on your credit report.

What is a credit report? 

Credit reporting companies, or credit bureaus, collect and keep financial data about you that they receive from creditors, such as credit card companies, lenders, and other financial institutions. This profile on your credit history is referred to as a credit report

Information commonly found on your credit report includes:

  • Personal information including your name, birth date, social security number, and your current and former addresses
  • Credit account information such as your current balance, credit limit, account payment history, and the name of your creditor
  • Collection items, delinquent accounts that were sent to collection agencies
  • Public records like any liens, foreclosures, bankruptcies, or civil suits and judgements
  • Inquiries, the number of times any given company has accessed your credit report

What does credit mean for home buying?

Lenders use the information on your credit report to get a better picture of your financial situation and determine whether to lend you money or not, and what interest rates to charge on loans based on their own financial risk of doing so. 

One of the first things we look for when starting the home buying process with clients is their credit report to determine the best loans and rates for your unique situation. This process, of a mortgage lender viewing your credit report before you place an offer on a home, is the first step to getting pre-approval. Unlike other lenders, however, the team at FMD doesn’t just see you as a number on a piece of paper. We take the time to get to know your situation and do our best to understand your goals to set you on the path toward the future you envision. 

Learn more about mortgage pre-approval

What is the best credit score for buying a house?

For conventional financing, you have to have a credit score of at least 620 to be eligible for a loan. That doesn’t mean 620 is the best credit score for buying a house, however. The truth is, the higher your credit score is, the more likely you will be approved for your mortgage and receive a better interest rate on your loan. 

How do I improve my credit score?

If you don’t qualify for a mortgage right now, or you would prefer a better rate than your current credit score allows, don’t worry! There are ways to improve your financial situation so you have your best credit score for buying a house.

These are a few steps that can help you improve your credit score and your home purchasing power: 

  • Monitor your credit: It’s advantageous to keep track of your credit score and credit report. You can download a free copy of your credit report from all three reporting agencies (Experian, Equifax, and TransUnion) at annualcreditreport.com. In fact, it’s actually mandated by law that you’re entitled to a free copy of your credit report once a year. This will not cause your credit score to go down, and it lets you monitor for any errors that could be affecting your score inaccurately. 
  • Take care of collection accounts: If you have any active, unpaid bills that are in collections, working to pay those off is crucial to improving your credit score. Collection agencies will sometimes negotiate and settle your debt for less than the full amount, but this kind of arrangement may appear on your credit report as a settlement and be less positive than paying the debt in full. 
  • Pay off debts before they hit the credit limit: Even if you’re paying your credit card off in full every month, allowing the card to reach its limit can have a negative impact on your overall credit score. Credit utilization is the amount of available credit you’re currently using, and it makes up 30% of your overall credit score. A high credit utilization ratio will lead to a lower credit score. That’s why it’s important to keep your credit card balances low and under control.
    • Pro-Tip: You can also ask your credit card company for a higher credit limit, which ultimately impacts your credit utilization ratio. As long as you don’t actually dip into the extra room you have on your card, you should quickly see the impact on your credit score. 
  • Continue making payments on time: This is probably the slowest and most common-sense way to improve your credit score, but it works! If you’re missing payments each month, nothing else you do will have a significant impact on your credit score. 
    • If you do miss a payment by more than 30 days, call your creditor immediately. Pay as soon as you can and ask if they will consider no longer reporting the missed payment to the credit bureaus. Every month an account is delinquent hurts your credit score, so keeping up-to-date on payments is paramount to improving or maintaining your score. 

Find a mortgage lender that works with your needs

When you work with the right lender that puts your needs ahead of their bottom line, you can avoid major credit pitfalls. The mortgage lending team at First Mortgage Direct is dedicated to helping each of our clients find the right mortgage and rate for them, whether they have the best credit score for buying a house or not. 

Here is a quick look at how our three pillars of honesty, integrity, and experience affect your home buying journey. 

Honesty

First Mortgage Direct isn’t the kind of lender to promise you an “amazing low rate” just to get you in the door. Our responsibility is to guide you through the process. We originate, process, and fund each mortgage with our company’s money and sell them on the secondary mortgage market.

No games. No gimmicks. No hidden fees. Our first and only goal is to provide you with the educational and stress-free mortgage shopping experience you deserve.

Integrity

As further proof that FMD isn’t just concerned with our profits, we don’t charge a lender fee. What determines our success is finding you the best online mortgage rates—not how many nickels and dimes we get on the back end. Even if a certain mortgage makes the most sense for you, we will never pressure you into taking it. Period. 

Our company started in 2008, a time when trust in mortgage lenders was at an all-time low. We strive to be better than the average online mortgage lender by working directly with each client to ensure consistent service in line with our principles.

Don’t just take our word for it, either. We have ratings of 4.8 stars in mortgage lender reviews on Zillow and 4.1 stars on Bankrate, both higher than the industry average. We also recently received an award from Expertise.com as one of the best mortgage refinance companies in Kansas City. Search around and you will find that our surveys and customer comments are all typically glowing, something in which we take immense pride.

Experience

We aren’t just online mortgage lenders; we’re homeowners, too. Our team understands that buying a home can be one of the most exciting, yet stressful times in your life, particularly for first-time home buyers. We intimately understand the emotions that come with searching for a house, the frustrations of an offer falling through, and the elation of finally finding your perfect home.

Simply put, our team of experienced loan consultants know what you are going through because they have been through it themselves. Our loan officers average more than 10 years of experience in the industry. In that time, they’ve helped countless clients just like you find online mortgage loans to secure their financial futures. 

We only hire the best of the best who fit our culture of better serving buyers and clients—regardless of their credit score. We have best-in-industry service and we will get purchases done when they need to get done.

Choose First Mortgage Direct for your online mortgage needs

Whether you already have the best credit score for buying a house or you need a little bit more guidance, the loan officers at First Mortgage Direct have your back. We will work with you directly to determine the best path forward for your loan. 

Our mission is to be your first step to a better future. We have a trusted and experienced staff of professionals that can guide you through the entire process, whether you are a first time home buyer or are looking to refinance your home for a better rate. It doesn’t matter if you have the best credit score for buying a house or if you just meet the loan requirements. You deserve nothing less than our honesty, integrity, and experience.

Ready to get started? Let us get to know a little more about you and what you’re looking for, and we will give you a free custom mortgage rate quote.