Your credit score plays a significant role in the homebuying process. It’s one of the key factors lenders consider when determining your loan options and terms. But there’s a common misconception about credit scores that might be holding some buyers back.
The Myth: You Need To Have Perfect Credit
According to Fannie Mae, only 32% of potential homebuyers have an accurate understanding of the credit score requirements lenders use. That means two-thirds of buyers are unsure of what lenders are looking for—and most tend to overestimate the minimum score needed.
The Reality: Perfect Isn’t Necessary
The truth is, you don’t need a perfect credit score to purchase a home. Let’s break it down by loan type with data from recent homebuyers:
There isn’t a one-size-fits-all credit score requirement. As FICO explains:
“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single ‘cutoff score’ used by all lenders, and there are many additional factors that lenders may use . . .”
Even if your credit score isn’t as high as you’d like, you may still qualify for a home loan. Keep in mind, while perfection isn’t required, your credit score can impact the type of loan options available to you and the terms you receive.
Working with a trusted lender will help you understand your eligibility and the steps to take next.
Simple Tips To Improve Your Credit Score
If you’re looking to boost your score and expand your loan options, here are a few tips from Experian and Freddie Mac:
1. Pay Your Bills on Time
Consistency matters. This applies to everything from credit cards to utilities. A track record of on-time payments reassures lenders of your reliability.
2. Pay Down Outstanding Debt
Lowering your overall debt improves your credit utilization ratio (the amount of credit used compared to your total limit) and shows lenders you’re a lower-risk borrower.
3. Hold Off on Applying for New Credit
Opening new accounts may seem like a quick fix, but too many applications in a short time can negatively impact your score. Instead, focus on improving your existing accounts.
Bottom Line
You don’t need a flawless credit score to qualify for a home loan. To better understand your position, partner with a knowledgeable lender who can help you explore your options and guide you toward homeownership.
