Learn More About Credit

Mortgage lenders use FICO® scores from all three major credit bureaus — Equifax, Experian, and TransUnion — pulled through a specialized tri-merge credit report. The middle score of the three (not the average) is the one used for underwriting. On joint applications, the lower middle score of the two borrowers typically drives pricing and program eligibility.

How Your FICO® Score Is Calculated

FICO scoring models weigh five categories, and understanding the mix tells you where to focus your effort first:

Payment history — 35%. Whether you pay bills on time. One 30-day mortgage or installment late can drop a strong score 60–100+ points.
Amounts owed / credit utilization — 30%. How much of your available revolving credit you're using. Keep balances below 30% of each card's limit; below 10% is ideal for maximum score.
Length of credit history — 15%. Age of your oldest account and average age of all accounts. Don't close old cards you've paid off — the age is helping you.
New credit / inquiries — 10%. Recent applications for new credit. Multiple mortgage inquiries in a 14- to 45-day window count as one.
Credit mix — 10%. A healthy blend of revolving (credit cards) and installment (auto, student, mortgage) accounts.

What the Numbers Actually Mean

Lenders group FICO scores into tiers that drive pricing:

760+ — Exceptional. Access to the best conventional rates and lowest mortgage insurance costs.
740–759 — Very good. Nearly identical pricing to the 760+ tier for most programs.
700–739 — Good. Qualifies for all major programs; a modest pricing bump versus 740+.
660–699 — Fair. Still qualifies for conventional and FHA financing; expect higher pricing adjustments.
620–659 — Below average. Conventional is available but pricey; FHA (580+) and VA are usually the better fit.
580–619 — FHA territory. FHA allows 3.5% down starting at 580. Conventional generally requires 620+.
Below 580. Options narrow considerably; a manual-underwrite FHA or a non-QM program may still work, and short-term credit repair often unlocks better terms fast.

Why the Same Score Doesn't Look the Same Everywhere

The FICO score you see on a consumer app (Credit Karma, your card's dashboard, Experian free scores) is usually a different scoring model than the one a mortgage lender pulls. Mortgage lenders use older, stricter versions — FICO 2 (Experian), FICO 5 (Equifax), and FICO 4 (TransUnion) — because Fannie Mae, Freddie Mac, FHA, and VA require them. It's common to see a 20–40 point spread between a consumer app and the mortgage tri-merge, so don't be surprised if your mortgage score comes back lower than what you were watching on your phone.

Shop rates without stacking damage

Federal scoring rules treat multiple mortgage inquiries within a 14-to-45-day window as a single inquiry. You can compare several lenders in a short window without compounding score hits — as long as you keep the comparison inside that window.

How Credit Affects the Loan Itself

Interest rate & monthly payment

Fannie Mae and Freddie Mac add "loan-level price adjustments" (LLPAs) based on the combination of credit score and loan-to-value. A borrower at 780 with 20% down may pay a base rate; the same loan at 660 with 5% down can price a full percentage point or more higher. Over 30 years on a $400,000 loan, that gap can exceed $80,000 in interest.

Mortgage insurance

Conventional PMI premiums are also credit-score driven. The same 5% down conventional loan can cost meaningfully more per month at 680 than at 760. FHA MIP, by contrast, is a flat rate that ignores your score — which is one reason FHA is often the better call in the low- to mid-600s.

Program eligibility

Some programs have hard credit floors — conventional generally starts at 620, FHA at 580 (with 3.5% down) or 500 (with 10% down), VA has no set floor but most lenders overlay 580–620, and USDA typically wants 640+. Non-QM programs (bank statement, DSCR, ITIN) each set their own minimums and price accordingly.

What Hurts Your Score the Most

Missed or late payments — even a single 30-day late on a credit card can drop 60–110 points.
High utilization — running balances over 30% of a card's limit compresses the score even when you pay on time.
Collections and charge-offs — recent collection activity is one of the largest negative factors.
New account openings just before applying for a mortgage — each hard inquiry outside a rate-shopping window costs points and shortens the average age of your accounts.
Closing old paid-off cards — reduces total available credit and average account age simultaneously.

Fast, Low-Risk Ways to Move Your Score Up

Pay revolving balances down below 10% of each card's limit before the statement closes — the statement balance is what gets reported, not what's left after your due date.
Dispute inaccurate collections or reporting errors with the bureau directly. Errors on mortgage tri-merge reports are surprisingly common.
Ask for a goodwill removal on old paid collections when the account is otherwise clean.
Become an authorized user on a family member's long-standing, low-utilization credit card to inherit the positive history.
Avoid opening or closing anything for the 90 days before you apply — steady is what the model rewards.

A rapid rescore can move fast

When you're already in loan process, some lenders can run a "rapid rescore" — updating a bureau within days after you pay down balances or clear a reporting error, rather than waiting a full cycle. Ask your loan officer whether it makes sense in your file.

Bottom Line

Credit isn't just a gatekeeper — it's a pricing lever. A 40-point score improvement before you lock a rate can save tens of thousands of dollars over the life of the loan and open programs that were otherwise closed to you. If your score is in a borderline range, talk with a licensed loan officer before you apply — a short credit plan is often the highest-ROI thing you can do as a buyer.