Your credit score is one of the biggest factors in your mortgage rate. A 100-point difference can mean tens of thousands of dollars over the life of your loan. Here's how to optimize your score before applying.
Why Credit Score Matters for Mortgages
| Score Range | Typical Rate | Monthly Payment* | Total Interest |
|---|---|---|---|
| 760-850 | 6.25% | $1,847 | $364,920 |
| 700-759 | 6.50% | $1,896 | $382,560 |
| 680-699 | 6.75% | $1,946 | $400,560 |
| 660-679 | 7.00% | $1,996 | $418,560 |
| 620-639 | 7.50% | $2,098 | $455,280 |
*Based on $300,000 loan, 30-year term. Rates are illustrative.
5 Factors That Affect Your Score
Payment History
35%Most important factor. Always pay on time.
Credit Utilization
30%Keep credit card balances below 30% of limits.
Credit History Length
15%Older accounts help. Don't close old cards.
Credit Mix
10%Variety of credit types (cards, loans) helps.
New Credit
10%Too many new accounts can hurt.
Action Steps to Improve Your Score
Check Your Credit Reports
Get free reports at AnnualCreditReport.com. Look for errors and dispute any mistakes.
Pay Down Credit Card Balances
Aim for under 10% utilization for best results. Pay down highest-utilization cards first.
Pay All Bills On Time
Set up autopay for minimum payments. Even one late payment can drop your score 50-100 points.
Don't Open New Accounts
Avoid new credit applications 6-12 months before applying for a mortgage.
Don't Close Old Accounts
Closing cards reduces your total credit limit and average account age.
Become an Authorized User
If possible, get added to a family member's old card with good history.
Timeline for Improvement
Fix errors on credit report, pay down balances
See improvement from lower utilization, on-time payments
Significant improvement possible, apply for mortgage
Calculate your potential savings with a better rate
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