Credit scores and mortgages in the US: what you need to know

A mortgage application involves a comprehensive credit assessment — one of the most thorough any lender will conduct. Understanding how credit scores affect mortgage approvals, and what steps to take before applying, can make a significant difference to your options and the rates available to you.

How lenders use credit data for mortgages

Mortgage lenders look at your credit report in detail, not just a headline score. They want to see a consistent history of on-time payments, no recent charge-offs or collections, manageable existing debt relative to income, no recent bankruptcy or foreclosure, and stable employment. Note that mortgage lenders typically pull all three bureaus and use older, mortgage-specific FICO score versions, then take the middle of the three scores — so the number you see in a free app may not be the number they use.

Is there a minimum credit score for a mortgage?

It depends on the loan program, and lenders can impose stricter requirements than the program minimum. Conventional loans backed by Fannie Mae or Freddie Mac generally look for a score around 620 or above. FHA loans allow a lower score — broadly 580 with the minimum 3.5% down payment, and lower still with a larger down payment — though many lenders set their own higher floor. VA and USDA loans have no program-wide minimum, but lenders apply their own. Having no score at all is workable on some programs through manual underwriting using alternative credit such as rent and utility payment history, but it takes more documentation.

Steps to take 6-12 months before applying

• Pull all three credit reports free at AnnualCreditReport.com and dispute any errors — corrections take time
• Avoid opening new credit accounts or making applications in the months before you apply
• Pay down credit card balances so reported utilization is low
• Do not miss a payment on anything, and do not let a card go over limit
• Keep your debt-to-income ratio down — lenders weigh it heavily alongside the score
• Build your down payment and closing cost reserves, and keep the money where the paper trail is clear
• Talk to a HUD-approved housing counselor or a licensed loan officer well in advance

Joint mortgages and credit linking

When two people apply together, the lender pulls and considers both credit reports. Many programs use the lower of the two applicants' representative scores to price the loan, so a co-borrower with weaker credit can raise the rate for both of you even if their income helps with qualifying. There is no permanent linking of credit files in the US as a result of a joint application — but a joint account or joint mortgage does appear on both reports for as long as it is open.