Your credit score plays a significant role in the homebuying process. It’s a key factor lenders use to determine your loan options and terms. However, a common myth about credit scores might discourage some potential buyers.
The Myth: You Need a Perfect Credit Score
Research from Fannie Mae shows that only 32% of prospective homebuyers have an accurate understanding of the credit score lenders require. This means most buyers either overestimate the minimum credit score needed or are unsure of the requirements altogether.
The Reality: Perfection Isn’t Required
The truth is, you don’t need a perfect credit score to purchase a home. To better understand what’s typically required, take a look at the average credit scores for recent homebuyers, broken down by loan type, in the graph below:
Understanding Credit Scores and Home Loans
There’s no universal credit score cutoff for getting a home loan. 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 . . .”
This means that even if your credit score isn’t as high as you’d like, you could still qualify for a home loan. While perfect credit isn’t necessary to buy a home, your score does influence the loan options and terms available to you.
Take the First Step: Consult a Trusted Lender
A professional lender can assess your situation and guide you through your options.
Tips to Improve Your Credit Score
If you want to enhance your credit score to unlock more loan opportunities, try these suggestions from Experian and Freddie Mac:
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Pay Your Bills on Time
Consistently paying credit cards, utilities, and other monthly bills on time shows lenders you’re reliable and responsible. -
Reduce Outstanding Debt
Lowering your debt improves your credit utilization ratio (the percentage of your credit limit you’re using) and makes you a more attractive borrower. -
Avoid Applying for New Credit
Opening new accounts may seem helpful, but too many applications in a short time can negatively impact your score. Instead, focus on improving your existing accounts.
Bottom Line
A perfect credit score isn’t required to secure a home loan. To understand your options and chart the best path forward, connect with a trusted lender today.