A credit score is one of the most important factors in successful homebuying. Not only can it determine whether you qualify for a mortgage loan, but also the type of loan you can get and what your interest rate will be.

The minimum credit score for a conventional loan is typically 620. Lenders will look at your scores from the credit bureaus: Experian, TransUnion, and Equifax. They’ll use your middle credit score to qualify you for the loan. Your lender will use the Equifax score of 700 for your application because it falls in the middle of your credit score range. If you apply with a co-borrower, they will look at their three scores as well. But they will take whichever middle score is lowest to determine your loan eligibility.

Conventional loans are very rate sensitive. The agencies base your mortgage rate partially on your credit tier. For instance, someone with a credit score between 660 and 679 gets a worse rate than someone with a score between 680-699.  

What affects your credit score?

The most important factors in credit scores are: 

• Payment history (whether or not you pay bills on time)
• Credit utilization (how much credit you’re using out of what you have available)
• Age of credit: How long have you had your oldest credit account
• New credit: Opening new credit cards or loans right before applying for a mortgage is a red flag to lenders
• Credit mix: Generally speaking, lenders like to see a solid mix of credit types, including credit cards, installment loans such as car payments or student loans, and (if applicable) a mortgage

Lenders look at your credit score and credit history to get a sense of the type of borrower you are. They want to know that if they approve you for a mortgage, you’re highly likely to make your monthly mortgage payment.  Your mortgage credit score may be different from the score you see through a free app. Those apps can give you a ballpark score, but lenders use strict criteria to approve home loan applications. 

Rather than make assumptions about what you’ll qualify for, it’s best to get preapproved by a lender who will pull your score and provide an accurate estimate of how much you can borrow.