Your credit score affects two things when you apply for a mortgage: whether you qualify at all, and what interest rate you pay. Both matter — but the rate impact is often the bigger financial variable over a 30-year loan.
Minimum scores by loan type
| Loan type | Minimum FICO score | Down payment |
|---|---|---|
| Conventional (Fannie Mae/Freddie Mac) | 620 | 3%–20%+ |
| FHA (Federal Housing Administration) | 580 (for 3.5% down) | 3.5% |
| FHA | 500 (for 10% down) | 10% |
| VA (veterans) | No official minimum; most lenders require 620+ | 0% |
| USDA (rural) | No official minimum; most lenders require 640+ | 0% |
The government-backed programs (FHA, VA, USDA) set their own eligibility requirements, but individual lenders often overlay stricter requirements — called lender overlays. The FHA allowing 500 with 10% down is a federal floor; most FHA lenders in practice won’t go below 580, and many require 620.
How your score affects your interest rate
The spread between a low qualifying score and an excellent score can be substantial. Lenders price mortgage rates by risk — a lower score means a higher rate.
As an illustration (representative ranges; actual rates vary by lender, market conditions, loan-to-value ratio, and loan amount):
| FICO score range | Rate environment relative to best |
|---|---|
| 760+ | Best available rates |
| 740–759 | Typically very close to best rates |
| 720–739 | Slightly higher; often negligible |
| 700–719 | Noticeably higher; meaningful impact over 30 years |
| 680–699 | Higher still |
| 660–679 | Significantly above best rates |
| 620–659 | Highest rates available; may require compensating factors |
Use the CFPB’s mortgage rate comparison tool (consumerfinance.gov/owning-a-home/explore-rates/) to see actual lender quotes for different credit score ranges and down payment amounts in your market. This is the most accurate way to quantify the rate difference for your specific situation.
The dollar impact of a lower rate
The CFPB’s mortgage rate comparison tool (consumerfinance.gov/owning-a-home/explore-rates/, data from Curinos, April 2025) showed that on a $400,000 purchase, buyers with a 625 credit score faced rates up to 2.75 percentage points higher than buyers at 700. The total interest difference over 30 years: up to $264,523. On the same loan, a 700-score buyer could save over a quarter-million dollars compared to someone just above the qualifying floor.
This is why improving your credit score before applying — even by 20–30 points — can be worth delaying a purchase by 6–12 months.
What affects your mortgage credit score
Lenders typically use a specific version of FICO — often FICO Mortgage Score versions 2, 4, and 5 — which may score differently than the consumer FICO scores you check. They pull all three bureaus and typically use the middle score of the three. For a co-borrower, they use the lower of the two middle scores.
The same factors affect mortgage FICO as any FICO score:
- Payment history (most important)
- Credit utilization (how much of your available credit you’re using)
- Length of credit history
- Credit mix
- New credit inquiries
Steps to improve your score before applying
If your score is below 720 and you want to qualify for better rates:
- Pay down credit card balances — reducing utilization has one of the fastest impacts on scores
- Don’t open new credit accounts — applications trigger hard inquiries and new accounts lower average age
- Don’t close old accounts — closing reduces available credit and can raise utilization
- Dispute errors on your credit reports — even small inaccuracies can cost points
- Keep all payments on time — a single 30-day late payment can drop a score significantly
The timeline for improvement varies. Paying down utilization can improve scores within a billing cycle. Rebuilding payment history after a late payment takes longer.
Private mortgage insurance (PMI)
For conventional loans with less than 20% down, lenders require private mortgage insurance (PMI), which protects the lender (not you) if you default. PMI costs roughly 0.5%–1.5% of the loan amount annually and is added to your monthly payment. Under the Homeowners Protection Act, you can request PMI cancellation when your loan-to-value ratio reaches 80% (20% equity) based on the original purchase price or appraised value. PMI cancels automatically when you reach 78% LTV (22% equity) based on the original amortization schedule, assuming you have a good payment history.
FHA loans require mortgage insurance regardless of down payment. For down payments below 10%, FHA mortgage insurance runs for the life of the loan. This is one reason buyers with higher credit scores often prefer conventional loans even with smaller down payments — they can cancel PMI once they build equity, whereas FHA MIP is harder to remove.