The #1 Reason People Don’t Get a Home: Credit Scores & How to Fix Them

One of the biggest roadblocks I see when helping people buy a home isn’t income, savings, or even the right house—it’s credit scores. Too often, excited buyers go to get pre-approved only to realize their credit score isn’t quite where it needs to be, causing delays. The good news? Credit scores can be improved!

In this post, I’ll break down:
✅ What affects your credit score
✅ What score range you should aim for
✅ How to improve your credit score
✅ A few myths that might be holding you back

What Affects Your Credit Score?

Your credit score is based on five main factors:

1.) Payment History (35%) – This is the biggest factor. Late or missed payments can seriously drop your score, while consistent on-time payments help it grow.

2.) Credit Utilization (30%) – This is the percentage of your available credit that you’re using. If your credit limit is $10,000 and you’re using $7,000, that’s a 70% utilization rate—way too high! Keeping it under 30% is ideal, and under 10% is even better.

3.) Credit Age (15%) – The longer you’ve had credit, the better. Lenders like to see a history of responsible credit use, so keeping old accounts open (even if you don’t use them often) can help.

4.) Credit Mix (10%) – Having a variety of credit types—like credit cards, auto loans, and a mortgage—can boost your score. But don’t take out unnecessary loans just for this!

5.) New Credit Inquiries (10%) – Each time you apply for a loan or credit card, a “hard inquiry” is recorded, which can temporarily lower your score. Too many inquiries in a short time can make lenders nervous.

What Credit Score Do You Need to Buy a Home?

Different loan types have different credit score requirements. Here’s a general breakdown:

• Conventional Loans: 620+ (Higher scores get better interest rates)

• FHA Loans: 580+ (With 3.5% down; some lenders allow 500+ with 10% down)

• VA Loans: No official minimum, but most lenders prefer 620+

• USDA Loans: 640+ for the best approval odds

That said, the higher your score, the better your loan terms—meaning lower interest rates, smaller down payments, and better loan options.

How to Improve Your Credit Score (Fast!)

• Pay Bills on Time – Even one late payment can drop your score. Set up autopay or reminders to never miss a due date.

• Lower Your Credit Utilization – Pay down credit cards to get your balance under 30% of your limit (or ideally under 10%).

• Don’t Close Old Accounts – Even if you don’t use a credit card often, keeping it open helps maintain your credit history length.

• Avoid New Hard Inquiries – Hold off on opening new credit accounts before buying a home.

• Check Your Credit Report for Errors – Get a free credit report from AnnualCreditReport.com and dispute any mistakes.

• Consider a Rapid Rescore – If you need a quick boost, some lenders offer a service that updates your credit file within days instead of months.

Don’t Make Big Purchases While Buying a Home!

One of the biggest mistakes homebuyers make is taking on new debt during the mortgage process. Once you're pre-approved, it’s crucial to keep your finances steady. Avoid buying a new car, financing furniture, or opening a new credit card. Even something as small as a new appliance on a payment plan can impact your credit score and debt-to-income ratio—potentially causing you to lose your loan approval. The best rule of thumb? If it’s not essential, wait until after closing!

Credit Score Myths That Could Be Holding You Back

🚫 “Checking my credit will hurt my score.” – Checking your own credit (a “soft inquiry”) does NOT affect your score. CreditKarma App is a great tool to keep up with your score!

🚫 “I need to carry a balance to build credit.” – Paying off your balance in full each month is the best practice!

🚫 “Closing old credit cards will help my score.” – Closing old accounts can actually hurt your score by shortening your credit history and increasing your utilization ratio.

🚫 “I need a perfect credit score to buy a house.” – Nope! You don’t need an 800+ score—many people buy homes with scores in the 600s.

Final Thoughts

Your credit score isn’t just a number—it’s a key that unlocks better home-buying opportunities. If you’re thinking about buying a home, start checking your credit early and take steps to improve it before you apply.

Need help figuring out where you stand? I work with amazing lenders who can guide you through the process—even if you’re not ready to buy yet.

Reach out, and let’s start planning your path to homeownership!