What Credit Score Should I Have to Buy a House?

Written by Anytime EstimateFebruary 23rd, 20223 minute read

Credit score graphicA credit score (your credit rating) is a three- digit number that indicates your creditworthiness. Credit scores can range between 300 to 850. A credit score of 300 is the worse possible credit score and 850 is the best credit score you can have. Mortgage lenders, banks, and credit card companies use credit scores to evaluate the lending risk to prospective home buyers and homeowners seeking a new mortgage. In short, lenders use credit scores to estimate the likelihood that you will repay the loan.


How to get your credit scores for free . . . no credit card!

Experian, Equifax & TransUnion offer free credit scores & free credit reports. No credit card is required! Daily monitoring is available for a small charge.

Equifax Core Credit™

1. Create your myEquifaxTM account. Equifax will ask you the standard identifying questions; name, rank, serial number . . . I mean, social security number, address, etc. After you finish with the identification details, you will see your VantageScore® credit score. The web page will also present you with the pros and cons of the factors affecting your credit score.

Equifax will also display your credit report. The credit report Summary includes, revolving accounts, mortgage accounts, installment accounts, other accounts, consumer statements, personal information, inquires, public records, and collections (if applicable). Equifax will also allow you to freeze your Equifax credit report and allow you to file a credit dispute. Nice format and the site is easy to use. Reports and the credit score are updated every 31 days. Of course, for a small monthly fee you can receive daily credit score updates and credit report monitoring. If you're working to improve your credit score, the small monthly fee is worth the cost, because you can see if you're making improvements.

Experian

2. Experian offers a free credit report and a free FICO® Score 8 model ( Fair Isaac Corporation). I tried it and found the service exceptional. The log in requirements was extensive, but it is worth it. Most lenders use FICO® scores for credit decisions. Base FICO® scores (including the FICO® Score 8) range from 300 to 850. For a fee, Experian can provide you with monthly 3-bureau FICO® Scores*

TransUnion

3. I attempted to obtain a free credit score from the TransUnion web site, but if TransUnion provides a free credit score like Equifax and Experian, I couldn't find it. There was a question and answer page regarding the reasons to obtain a free credit report. I found the TransUnion unsatisfactory.

FICO® versus VantageScore® credit scores

Both companies attempt to predict the applicant's credit risk. Both companies boil down information derived from the customer's credit report. You will notice that there is a significant difference between the FICO® and VantageScore® credit scores. Like Heinz and Hunt's ketchup, each company uses different ingredients to come up with their ideal credit score number. The FICO's industry-specific scores range from 250 to 900, while the base FICO® Scores range from 300 to 850.

FICO® ScoresVantageScores®
  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%
Consumer Brochure(PDF)
  • Payment history is very important.
  • Influential in terms of age and kind of credit
  • Use of credit limit as a percentage of total credit limit: very influential
  • Debt and total balances are somewhat important.
  • Credit inquiries and recent credit behavior: less influential
  • Credit available: less influential
Consumer Brochure(PDF)


Rotating question markFrequently Asked Questions About Credit Scores

Q. Does having 2 credit cards build credit fast?
A. According to Experian, having more cards can increase your total available limit and can positively affect credit scores. However, it's important to keep low balances, approximately 30% or less of the credit card limit. Opening new sources of credit will initially LOWER your credit scores, however, by keeping balances low and/or paying off nominal balances each month, the credit scores should increase.

Q. Does paying off all debt increase credit score?
A. Actually, paying off all debt will decrease your credit score. A better strategy is to pay down the credit balance to 30% of the credit limit. And don't close your accounts. The credit history plays a significant role in the credit score formula.

Q. How many years of credit do I need to buy a house?
A. The FHA, USDA, VA, and conventional loans are very accommodating with applicants who have a thin or (no) credit history. The FHA loan allows rent receipts, phone bills, and utility statements to establish creditworthiness.

Q. What hurts your credit score the most?
A. Missing a credit card or loan payment can drastically affect your credit score. Your payment history accounts for 35 percent of your FICO® and Vantage Scores®