Minimum Credit Scores: What Lenders Actually Require
FHA loans require a minimum credit score of 580 to get the 3.5% down payment option. If your score is between 500 and 579, you can still get an FHA loan, but you need to put down 10%. Below 500, most FHA lenders won't approve you. These scores are the bare minimum, and qualifying at 580 doesn't mean you'll get the best rates—you'll be at the bottom of the approval range.
Conventional loans typically require a minimum score of 620, but that's just the lender's floor. In practice, you'll compete better with a 660+ score. Below 660, expect higher rates, larger down payment requirements (15-20% instead of 5%), and stricter income verification. The sweet spot for conventional loans is 740+, where you access the best rates and terms.
VA loans (for military members, veterans, and surviving spouses) don't have a specified minimum credit score requirement, but most VA lenders use 620 as their internal threshold. If you're eligible for a VA loan, this is a huge advantage—you can often qualify at a lower score than with conventional loans, and VA loans don't require PMI.
USDA loans (for rural homebuyers) typically require a 640+ credit score, though some lenders will approve 600+. Your income, debt-to-income ratio, and savings matter more than your exact score. If you're considering a USDA loan, talk to multiple lenders—there's variation in how strictly they enforce score requirements.
The difference between 620 and 740 is dramatic. A 740-credit borrower might get 6.5% on a 30-year fixed mortgage. A 620-credit borrower might pay 7.5-8%. Over 30 years on a $300,000 loan, that 1-1.5% difference costs $60,000-$90,000 in additional interest. This is why improving your score before buying is one of the highest-ROI financial moves you can make.
How Your Score Affects Interest Rates and Total Cost
Every 20-point increase in credit score can reduce your interest rate by 0.25-0.5%. Moving from 620 to 680 might drop your rate from 7.5% to 7.0%. Moving from 680 to 740 might drop it another 0.5% to 6.5%. On a $300,000 mortgage, each 0.25% drop saves roughly $45/month and $16,200 over 30 years.
Your down payment also affects rates, and the effect interacts with your credit score. A 740-credit borrower with 10% down might get 6.75%. A 620-credit borrower with 10% down might get 8.0% or worse. Even if you're putting down 20%, credit matters—you might get 6.5% at 740 and 7.25% at 620.
The compounding effect is real. Better score + larger down payment + lower rate = dramatically lower total cost. A 740-credit borrower with 20% down at 6.5% on a $300,000 loan ($240,000 borrowed) pays roughly $475,000 total over 30 years. A 620-credit borrower with 5% down at 7.75% on a $285,000 loan pays roughly $525,000 total. The 620-credit borrower pays $50,000 more for the same home because of the score and down payment difference.
Don't just focus on the interest rate—calculate total out-of-pocket cost, not just monthly payment. The monthly payment difference might be $100, which seems manageable. But over 30 years, that's $36,000 in additional cost. That's huge. This is why improving your credit score before applying is worth months of effort.
Building Credit from Scratch: The Timeline
If you have no credit history (new immigrant, young person with no previous debt), you need to start building. Get a secured credit card ($200-$500 deposit), where your deposit becomes your credit limit. Use it for small purchases and pay it off monthly. After 6-12 months of perfect payment history, you'll build a score to 650-700.
Get a credit-builder loan from a credit union. You borrow $500-$1,000, and the money goes into a savings account as collateral. You make monthly payments, which get reported to credit bureaus. After 12 months of on-time payments, you've built 12 months of credit history and have a score of 650-700. The loan costs you the interest (~$50-$100), but you get your deposit back and proven credit history.
Become an authorized user on someone else's credit card account (a family member or spouse). If they have perfect payment history and low balances, their positive history transfers to you. You'll see an immediate boost of 50-100+ points if the account has a long history and perfect payment record. This is one of the fastest ways to build credit if you have someone willing to help.
Expect 6-12 months to build credit from zero to 650-700. Expect 12-24 months to reach 740+. Don't try to rush this by opening multiple credit cards or accounts. Each new account lowers your average age of credit and generates a hard inquiry that lowers your score. Patience is the answer—build slowly and consistently.
Fixing Bad Credit: Strategies and Timelines
If your score is 620-680, you need to improve it before buying. The fastest improvements come from reducing credit card balances. If you have five credit cards each maxed out at 90% of their limit, that 90% utilization ratio is killing your score. Your debt-to-credit ratio should ideally be below 30%, and absolutely below 50%.
If you can pay off a credit card entirely, do it. Dropping from $5,000 balance to $0 on a $5,000 limit card is huge for your score—you go from 100% utilization to 0%. Your score can jump 50-100+ points. If you have three maxed-out cards, prioritize paying off the smallest one entirely, then focus on the next. This 'avalanche' approach (highest interest first) makes financial sense and optimizes your utilization ratio simultaneously.
Stop applying for new credit. Each application triggers a hard inquiry that drops your score 5-10 points. Don't get a new credit card, car loan, or personal loan while you're trying to improve your score. Even if the new account would ultimately help, the initial hit sets you back. Wait 6-12 months after your last application before applying for a mortgage.
Pay every bill on time, every time. Payment history is 35% of your score. One missed payment can drop your score 100+ points. If you have a history of late payments, on-time payments for 12+ months will significantly improve your score. If you have one recent late payment, the impact decreases over time—after 2 years, it's less damaging; after 7 years, it falls off your report entirely.
If you have collections accounts, negotiate a settlement if possible. Paying off an old collection is better than leaving it unpaid, but it's still on your report. The best outcome is a 'pay for delete' where you negotiate with the creditor to remove the account from your report after you pay. This is rare but worth asking about. A settled or removed collection account can improve your score 50-150+ points depending on its age.
Working with a Credit Repair Professional: When It Makes Sense
Credit repair services claim they can improve your score by disputing inaccurate items on your credit report. Some are legitimate. Many are scams that take your money, dispute random items (which usually don't work), and disappear. Before hiring anyone, check the Better Business Bureau (BBB) rating and read reviews on independent sites (not their website).
What legitimate credit repair does: identify inaccurate items on your credit report and dispute them with credit bureaus. Errors do occur—a closed account still showing as open, a payment marked late when it was on-time, a fraudulent account in your name. Disputing these can improve your score. You can do this yourself for free (annualcreditreport.com), but it requires time and persistence.
What credit repair can't do: remove accurate negative information, increase your credit limit instantly, erase late payments, or create credit history you don't have. If you have a legitimate late payment from last year, no repair service can remove it. You have to wait for time to pass. If a debt is accurate and unpaid, legitimate repair can't make it disappear—you need to pay or settle it.
Score Pros (Score Pros{external}) is a legitimate option if you want professional help. They analyze your credit report, identify disputes worth pursuing, and handle the process. It's not a magic fix, but if you have inaccurate items on your report, they can get them removed, which improves your score. If you prefer hands-on control, dispute items yourself. If you prefer a service to handle it, vet carefully and go with a reputable firm.
Timeline: How Long Until You're Ready to Buy
If you have a 620 credit score and can dedicate 3-6 months to improvement, you can likely reach 680-700. Focus on reducing card balances to below 30% utilization. That alone might add 50-75 points. If you can pay off one card entirely, add another 50-75 points. Six months of on-time payments adds stability. You're looking at 120-150 point improvement over 6 months if you execute flawlessly.
If you have a 580 credit score and want to reach 640 (a meaningful threshold), budget 6-12 months. Start with paying off cards or settling old debts. Get a credit builder account. Make sure every payment is on time. Monthly, your score will improve slowly, then accelerate as your utilization drops and payment history builds. After 12 months, you should have 650-700.
If you have collections or recent late payments, expect 12-24 months of work. You need to settle collections (negotiate if possible), demonstrate 12+ months of perfect payment history, and reduce utilization. This timeline is realistic and achievable, but requires discipline. You can't miss payments, open new accounts, or take shortcuts.
Use our affordability calculator to see how your current score and potential improved score affect your pre-approval amount and rate. Seeing that a 100-point improvement gets you $50,000 more borrowing power and saves $100/month is motivating. You've got a tangible goal.
If you're just beginning your homebuying journey and your score is under 680, spend 6-12 months fixing it before formally applying. The effort is worth tens of thousands in interest savings. If your score is already 720+, apply now—you'll get the best rates and terms.