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A credit score of 620 means you have “fair” credit, according to the commonly used FICO scale. It’s not the worst by any means, but it’s not great, either. So, what does that mean in terms of becoming a homeowner? Is 620 a good credit score to buy a house?
In short, yes, this score will meet the minimum requirements for many types of home loans. However, you certainly won’t be eligible for the lowest rates or best terms a lender can offer. Here’s what else you should know about how your credit score impacts your ability to buy a house.
What credit score do I need to buy a house?
Your credit score is one of the most important factors lenders review when evaluating your mortgage application. There is no one specific score that will guarantee approval, and it’s not the only criteria a lender will analyze, but different loan types typically do have minimum score requirements.
To be eligible for a conventional loan, you’ll need a score of at least 620 or higher. However, having a 620 is no guarantee you’ll be approved for a loan. While this is the lowest score many lenders will accept, that doesn’t mean it’s a good credit score. On the FICO scale, 620 falls into the “fair” category, which is below average and signals that you might be a credit risk. It’s also considered “fair” by VantageScore standards.
Other loan types can have lower minimum scores — for example, you may qualify for a Federal Housing Administration (FHA) loan with a credit score as low as 500. However, you’ll need to put down more money upfront than those with a score of 580 or higher.
What types of loans can I get with a 620 credit score?
A 620 credit score meets or exceeds the minimum criteria for several popular types of mortgages, including:
- Conventional loans: These loans are provided and backed by private lenders, rather than government institutions. While 620 is the minimum credit score needed to qualify, it is by no means a guarantee of approval, and you won’t be offered the lower rates that those with higher scores might.
- FHA loans: A 620 score is well above the minimum for an FHA loan, a popular type of mortgage for first-time homebuyers. Applicants need a score of at least 500 with a 10 percent down payment.
- VA loans: Eligible military service members, veterans and surviving spouses might consider a VA loan, which is guaranteed by the U.S. Department of Veterans Affairs. There isn’t an official minimum credit score requirement, but lenders generally look for a score of 620 or higher.
You’ll have to raise your score if you’re hoping to take out one of these home loans:
- Jumbo loans: If your loan amount exceeds the limits set by the federal government, you may need a jumbo loan. (For reference, in 2024, the limit is $766,550 for most parts of the country.) However, these loans’ minimum credit score requirements start around 700, so you won’t qualify with a 620 score.
- USDA loans: Designed to help low- to moderate-income borrowers purchase a home in designated rural areas, USDA loans are guaranteed by the U.S. Department of Agriculture. You’re not likely to qualify for one with a score of less than 640.
How does a 620 credit score impact how much house I can afford?
Your credit score — whether it’s poor, exceptional or somewhere in-between — significantly affects the interest rate and terms of your loan. Simply put, the higher your score, the more likely you are to get a lower rate. Maintaining a better credit score (and, as a result, securing a lower interest rate) can save you thousands of dollars over the life of your loan.
For example, if you qualify for a conventional loan with a credit score of 620, you’ll likely have to pay a higher interest rate than if you applied for the same loan with a 700 score, which is firmly in FICO’s “good” range. This means you’ll pay more in interest each month, costing you much more money over the life of the loan.
For example, let’s say that you’ve found the perfect home, and it costs $450,000. If you put 20 percent down on a 30-year fixed-rate loan at a rate of 7 percent, Bankrate’s mortgage calculator shows that you’d pay $2,395 per month in principal and interest. However, at a rate of 7.5 percent, that amount would increase to $2,517. It might not seem like much, but that slight difference between the rates adds up to $1,464 per year, or nearly $44,000 over the course of 30 years.
How can I improve my credit score?
The top score for both FICO and VantageScore scales is 850. If you’re currently at 620, you have plenty of room for improvement. These strategies can help you boost your score before applying for a home loan.
- Keep up with your payments: Your payment history is the most important factor in determining your credit score. Making on-time payments will show lenders you can responsibly handle and repay your debt.
- Improve your credit utilization ratio: Your credit utilization ratio compares how much debt you have against your overall credit limit. For instance, if your credit limit is $10,000 but you owe $5,000, your ratio would be 50 percent. Paying off your debt is the best way to improve this ratio, but you can also do it by requesting an increase to your credit limit.
- Don’t open or close any accounts: You want lenders to see that you’re financially stable, so avoid opening any lines of credit while applying for a mortgage. Don’t close any old accounts, either, even if you’re no longer using them.
Next steps
If you have a 620 credit score, raising it can help you secure a more favorable interest rate and loan terms, reduce your mortgage payments and get more house for your money. Staying up-to-date with your payments, settling existing debts and minimizing your credit card balances are excellent ways to increase your score.
When you’re ready to start shopping for a home, enlist the expertise of a trusted real estate agent. As experts in the local housing market, agents work closely with you through the entire home-buying process, from identifying properties that meet your needs and budget all the way to closing the deal.
FAQs
Yes, it’s possible to buy a house with a 620 credit score. This score meets the minimum credit score guidelines for several types of mortgages, including conventional loans — but credit score is not the only factor lenders look at, so a 620 score does not guarantee approval.
If you have a 620 credit score, you’re not likely to qualify for a lender’s lowest interest rates. Financially, it might make more sense to wait to buy a house until you’ve improved your score, so you can get a loan with better terms.
To figure out how much house you can afford, you’ll need to compare your income against your debt obligations. Generally speaking, experts often recommend following the 28/36 rule, which advises spending no more than 28 percent of your income on housing. For example, if you make $90,000 per year, you could designate up to $2,100 per month on mortgage expenses.
