What is a credit score?

A credit score reflects your ability to pay back debt in a timely, reliable manner. 

When you apply to purchase a home, lenders will use your credit score to understand . Your score will be a determining factor in the rates and types of mortgages and loans you will receive. 

Know your credit score and ready to see what you qualify for?  

What is a credit score used for? 

Your credit score can be used for a number of things, most notably  and the type of loan you qualify for. 

Types of credit scores 

FICO score is the most common credit model used by lenders. FICO scores are rated on a range of 300-850 and determined by several factors, including length of credit and payment history.  

Another common credit model is VantageScore, which uses the same range as a FICO score but has different criteria for determining your score. 

Credit score ranges 

 from 300 to 850. Where you land in that range can affect what kind of loan you may be qualified for. 

FICO scores are divided into five categories: 

300-579  

If your credit lands in this range, it will be challenging to get a mortgage or loan. If you can get a mortgage in this range, the interest rates will probably be high, making the loan more expensive overall. 

580-669 

This score still has some risk but shows an amount of creditworthiness. If your score is in this range, you might be able to get an FHA loan, but the interest rates can be above average.  

670-739 

Credit scores in this range have more options when it comes to mortgages and a better chance of competitive interest rates, which saves you more money. 

740-799 

People with credit scores in this range are seen as low-risk borrowers, which means better loan terms and lower interest rates, leading to bigger savings. 

800-850 

A score in this range shows lenders that you are very responsible when managing your money. People with loans in this range usually get the best interest rates and terms.  

Which factors affect my credit score? 

There are five factors that affect your FICO credit score. 

Payment history 

Payment history is the biggest contributor to your FICO credit score, making up 35%. This shows mortgage lenders whether you can reliably make payments on time. 

Credit utilization 

Credit utilization shows the amount of available credit that you are using, making up 30% of your FICO credit score. Credit experts suggest keeping this number below 30% for best credit health. 

Length of credit history 

The length of your credit history, making up 15% of your score, shows lenders how well you've managed credit in the past. For this, credit bureaus look at the average age of all your accounts, as well as age of your oldest and newest accounts.* 

Types of credit 

About 10% of your score comes from having different types of credit accounts, such as mortgages, credit cards and installment loans. This shows lenders that you can manage different kinds of credit. 

New credit 

New credit makes up 10% of your score and can be affected by opening new credit accounts. Applying for new credit accounts can trigger a hard inquiry, which will lower your credit score some for a year. 

What is a good credit score for buying a house? 

A credit score of at least 670 is good, but the exact requirements will depend on the type of mortgage you are looking to get. Each loan program has different requirements when it comes to credit score. 

Ready to find out what loan is best for your credit score?  

_{*Rate, Inc. does not provide credit counseling or credit repair services.}