Effective Nov. 16, 2025, both Fannie Mae and Freddie Mac no longer require a specific minimum credit score for conventional loan approval. Instead, loan decisions will be based on an analysis of overall credit risk factors.
It’s true that having a good credit score will give you better mortgage rates and save you money, but do you know the minimum and credit score you need to qualify for a mortgage and buy a house? Even more basic, what is a credit score?
We’ll explore the ins and outs of credit scores in this article, including credit score ranges, what constitutes a good credit score, why it’s important to have a good credit score, how credit scores are determined and how to improve yours.
By the time you finish reading, you’ll be able to check one more to-do (learning about your credit score) off your list.
Understanding Credit Scores
So, what is a credit score, anyway?
Your credit score, which is a number that ranges from 300 – 850, shows how well you handle debt and how likely you are to repay a loan on time. You can think of a credit score as a financial wellness indicator, especially in terms of qualifying for a mortgage.
Credit scores are different from credit reports – it’s easy to confuse the two when they have such similar names! Credit reports are statements that come from the three credit bureaus: Experian Ⓡ, EquifaxⓇ and TransUnionⓇ. They contain information about your credit activity and credit history, including how well you’ve paid off your debts to creditors in the past.
Lenders will request your credit report from one or more of the credit bureaus to assess how risky it is to lend to you. They’ll use credit reports to determine whether you meet the terms of an existing credit account.
FICOⓇ, VantageScoreⓇ, EquifaxⓇ and ExperianⓇ develop credit scoring models. Credit scoring models are software that analyze credit reports to generate credit scores. All credit scores are determined using similar criteria and lenders may use all four types of scoring models. However, FICOⓇ has been the dominant company in the industry for a long time and it considers information from the three credit reporting agencies.
Even though you pay the same bills, have the same number of loans and stay on top of your credit cards, your credit score can change from month to month. That’s why it’s important to request a free copy of your credit report from each of three major credit reporting agencies once a year at AnnualCreditReport.com. Doing so helps you monitor your credit score each year and helps you look out for mistakes on your reports. You can also get your credit report by calling (877) 322-8228.
You don’t want to be denied a mortgage because of an error that one of your creditors made, such as mistaking your name for someone else’s. If you do find a mistake, file a dispute with the creditor and the credit bureau to get it fixed immediately.
You can also get your credit report more frequently if you’ve been denied credit, if you are on welfare, unemployed or if you found that you have an inaccurate credit report.
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What Are The Credit Score Ranges?
Credit scores range between 300 – 850, but within those credit score ranges are various ratings that indicate whether you have a “bad,” “fair,” “good,” “very good” and “excellent” credit score. Let’s take a look at the typical credit score ranges and what they mean.
FICOâ Credit Score Ranges | Credit Score Rating | Description |
|---|---|---|
Less than 580 | Poor | Applicants in this credit score range may not qualify for a loan at all or may get one at higher rates. |
580 – 669 | Fair | Considered less qualified borrowers, this means that lenders consider borrowers to be highly risky. |
670 – 739 | Good | Borrowers in this category provide little risk – few in this category are likely to become delinquent on their loans. |
740 – 799 | Very Good | Applicants with scores in this range may receive better interest rates compared to other borrowers. |
800 or more | Excellent | Applicants in this range should receive the best rates from lenders. |
What Is A Good Credit Score?
A borrower with a good credit score falls into the 670 – 739 range for most credit scoring institutions.
A FICO® credit score is made up of the five following factors:
- Payment history: 35%
- Credit utilization: 30%
- Length of credit history: 15%
- Credit mix: 10%
- Recent credit inquiries: 10%
As a borrower with a good credit score, you handle these key areas well, which means you handle credit as a whole well. We’ll go over these individual factors in a section below.
Why Is It Important To Have A Good Credit Score?
It’s important to have a good credit score. A home buyer with good credit is more likely to qualify for lower mortgage rates when buying a house.
Does this mean that you have to have a good credit score to buy a house? Not necessarily. Many lenders will approve you for a conventional loan with a credit score of 620 or higher. If you have a FICO® score closer to 620 than 800, just remember that you may pay a higher interest rate for your mortgage.
How Is Your Credit Score Determined?
Let’s go over the factors that influence your credit score – the five factors we mentioned above:
- Payment history: Payment history means that you make your payments on time, every time they are due. This is one of the main factors that affects your credit score because your payment history shows lenders how well you pay back any debt
- Length of credit history: How long have you been using credit? Using credit for a long time works to your advantage because lenders can see your long history of (hopefully successful) payments.
- Types of credit accounts: Your credit mix is the amount of credit you have. It’s advantageous to have a mix of different credit types, such as student loans, car loans, credit cards and store credit cards.
- Amount owed: The total balance on your last statement is generally the amount that will show in your credit report. Your level of debt can help a lender predict your likelihood of future credit performance and how you make your credit obligations on time. Now, this doesn’t mean you’re automatically a high-risk borrower. But as your balances increase, your lender could decide you may have trouble making mortgage payments later on.
- Credit utilization: Credit utilization refers to the amount of credit you actually use. Using too much of your available credit decreases your score. For example, if you have a $10,000 credit limit per month on a credit card and use every bit of that limit each month, your credit utilization increases, which decreases your credit score.
- Recent credit inquiries: Recent credit inquiries also play into your credit score. Credit inquiries can stay on your credit report for up to 2 years, but it shouldn’t affect your credit scores for more than a year. In most cases, inquiries cease to have any significant impact on scores after just a few months.
How To Improve Your Credit Score
Not happy with your credit score? If you’d like to move from a “fair” credit score to a “good” credit score, it’s totally possible. Let’s go over some tips and tricks.
Make Payments On Time
Late payments lower your credit score. Making all payments on time – whether it’s for rent, credit card bills, personal loans or another type of credit – helps you increase your credit score. It’ll also save you money, too, because you won’t have to pay late charges!
Avoid Closing A Credit Card Account
Try to avoid closing credit card accounts before you apply for a mortgage because multiple cancellations can negatively affect your credit score. You may also affect your credit score if you close the credit card you’ve had the longest, because that will shorten the length of your credit history.
Consider keeping your credit cards open but place them in a locked drawer or other designated “safe spot” so you’re not tempted to use them.
Increase Your Credit Limit
Increasing your credit limit can help increase your credit score because you change your credit utilization rate to show that you aren’t using much credit relative to your credit limit. Many credit card issuers allow cardholders to ask for a credit limit increase online.
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The Bottom Line
Your credit score, a number that ranges from 300 – 850, shows how well you can repay debts.
Lenders look to your credit score to indicate your likelihood that you’ll pay them back in full. They might give you a higher interest rate or deny you altogether if your credit score isn’t high enough. This can cost you a lot in the long run and might even mean you’ll have to rent instead of purchasing a home.
Your score is determined by several factors, including your payment history, length of your credit history, types of credit accounts, the amount you owe, your credit utilization and your recent credit inquiries.
You can raise your credit score using several different methods, including making payments on time, avoiding closing a credit card account and increasing your credit limit.
Ready to learn more? Check out our article about the credit score needed to buy a house when considering your mortgage options.
Melissa Brock
Melissa Brock is a freelance writer and editor who writes about higher education, trading, investing, personal finance, cryptocurrency, mortgages and insurance. Melissa also writes SEO-driven blog copy for independent educational consultants and runs her website, College Money Tips, to help families navigate the college journey. She spent 12 years in the admission office at her alma mater.
