Thinking about buying a home? One of the most important numbers in the process isn’t the listing price, it’s your credit score. Also known as your FICO score, this three-digit number plays a huge role in your ability to secure a mortgage, your loan terms, and even your monthly payment.

Most buyers focus heavily on saving for a down payment, but many overlook the impact of their credit score. If you’re planning to purchase a home, preparing your credit in advance could save you thousands over the life of your loan.

Here’s what you need to know about improving your credit score before applying for a mortgage, and how to avoid common missteps along the way.

What credit score do you need to buy a home?

Your credit score tells lenders how reliable you are when it comes to repaying debt. According to Realtor.com, a higher score not only improves your chances of qualifying for a loan, it also opens the door to better interest rates.

Here’s a breakdown of typical minimum credit scores by loan type:

• Conventional loan: 620 minimum
• Jumbo loan: 700 minimum
• FHA loan: 580 minimum with 3.5% down, or 500 with 10% down
• VA loan: No official minimum, but most lenders look for 620
• USDA loan: Most lenders require between 580 and 620

Every lender sets their own standards, so these numbers are a guideline, not a guarantee. The higher your score, the better your approval odds and loan terms.

How to check your credit report

There are three major credit bureaus, Experian, Equifax, and TransUnion, and each maintains its own version of your report. You can request a free copy from all three once a year at AnnualCreditReport.com. Keep in mind, your credit report doesn’t include your score, you’ll need to request that separately, usually for a small fee.

Many credit card companies also offer free access to your score and updates on your credit activity. Once you’ve pulled your report, carefully review each page, especially the section that lists late payments, collections, or incorrect account information.

How to improve your credit score before buying a home

Improving your credit score takes time and strategy. Here are several ways to get started:

1. Dispute errors
According to a 2021 Consumer Reports study, about 34% of people found at least one error on their credit report. Incorrect account balances, late payments, or even accounts that don’t belong to you can drag down your score. Dispute these issues with the reporting bureau and the original creditor. Once corrected, you could see an immediate improvement.

2. Remove one-time mistakes
If you’ve missed a payment once or twice, call the creditor and ask if they’ll remove the negative mark. Many companies will make a one-time exception if your overall payment history is solid.

3. Ask for higher credit limits
Raising your credit limit (without increasing your balance) improves your credit utilization ratio, which is the percentage of credit you’re using compared to what’s available. For example, if you owe $1,000 and your limit is $5,000, your usage is 20% a much better look than 60% usage on a $1,500 limit.

4. Pay bills on time
Your payment history makes up 35% of your credit score, which means every late payment counts. Set up auto-pay or calendar reminders to avoid missing due dates.

5. Be patient
Negative information, like late payments or collections, can stay on your credit report for up to seven years. That said, new positive activity will gradually outweigh older missteps. Start working on your credit well before you begin house hunting.

Loan types and credit score requirements

When you’re ready to buy, your score will help determine which type of loan you qualify for:

• Conventional loans typically require a score of 620 or higher. Some lenders may accept scores as low as 500, but you’ll need a strong overall application.
• Jumbo loans, used for higher-priced homes, usually require a score of at least 700.
• FHA loans, backed by the Federal Housing Administration, are more flexible. A score of 580 allows for a 3.5% down payment, while a 500 score requires 10% down.
• VA loans are available to eligible military service members and typically require a score around 620.
• USDA loans are for rural buyers and usually require a score between 580 and 620.

The bottom line

Improving your credit score is one of the smartest steps you can take before applying for a mortgage. A higher score not only improves your chances of approval, it could also lower your interest rate and reduce your monthly payment.

Start by reviewing your credit reports, fixing any errors, and creating a plan to reduce debt and build positive payment history. The sooner you begin, the more time your score has to grow.

Frequently Asked Questions

1. What credit score do I need to buy a home?
Most conventional loans require a minimum credit score of 620. FHA loans may go as low as 500 with a 10% down payment. VA and USDA loans typically require scores of 580 to 620, depending on the lender.

2. How do I check my credit score and report?
You can get a free credit report from each of the three major bureaus, Experian, Equifax, and TransUnion, at AnnualCreditReport.com. Some credit card companies also offer free credit score monitoring.

3. What are the most effective ways to improve my credit score?
Pay bills on time, reduce your credit card balances, request higher credit limits, and dispute any inaccuracies on your credit report. These actions can boost your score over time.

4. Can errors on my credit report affect my mortgage approval?
Yes. Mistakes like incorrect late payments or accounts that don’t belong to you can hurt your score. Dispute any errors directly with the credit bureau and the reporting creditor to have them corrected.

5. How long does it take to raise my credit score?
It depends on the issue. Disputing errors can result in quick changes, while improving payment history or reducing debt may take several months. Starting early gives you the best chance of qualifying for favorable loan terms.

6. What credit score is needed for a jumbo loan?
Jumbo loans typically require a minimum credit score of 700 due to the higher loan amount and risk level for lenders.

7. Are there different score requirements for different mortgage types?
Yes. FHA, VA, USDA, and jumbo loans each have different guidelines. FHA loans are the most flexible, while jumbo and conventional loans typically have stricter score requirements.

8. Can I still buy a home with a low credit score?
Possibly. FHA loans allow for lower credit scores with larger down payments. However, you may face higher interest rates or stricter approval conditions. Working with a lender early can help you find the right program.

9. Will increasing my credit card limit improve my score?
Yes, as long as your balance stays the same or is paid down. A higher credit limit lowers your credit utilization ratio, which is a key factor in your score.

10. Should I wait to buy a home until my credit improves?
If your score is currently too low to qualify or would result in a significantly higher interest rate, waiting and improving your credit may save you money in the long run.

If you’re preparing to buy a home in San Antonio or surrounding areas and want guidance on credit, financing, or loan options, contact Tami Price, Realtor. With 18 years of experience helping buyers at every stage of the process, Tami can connect you with trusted lenders and walk you through what it takes to make your dream of homeownership a reality.