When you apply for a mortgage, lenders use your financial history to assess how likely you are to pay back the loan. Your credit score—specifically your FICO score—is the primary tool lenders use for this risk assessment. A higher credit score signals that you are a low-risk borrower, allowing you to qualify for significantly lower interest rates.

FICO Score Ranges and Interest Rates

Mortgage rates are structured in tiers. Even a jump of 20 points that pushes you into a higher tier can save you thousands of dollars. Here is how FICO score tiers typically translate to mortgage offers:

  • 740 to 850 (Excellent): You will qualify for the lowest interest rates available. Lenders will compete for your business, and loan approvals are fast.
  • 700 to 739 (Good): You will receive very competitive rates, though they may be 0.25% higher than the top tier.
  • 680 to 699 (Fair): You will qualify for conventional loans, but your interest rates and closing fees will be slightly higher.
  • 620 to 679 (Below Average): This is the minimum range to qualify for conventional mortgages. You may need to consider FHA loans to get acceptable terms.
  • Below 620 (Poor): Conventional mortgages are very difficult to secure. Borrowers in this range will face high interest rates and large down payment requirements.
"On a $400,000 mortgage, a borrower with a 760 FICO score will save over $80,000 in interest over 30 years compared to a borrower with a 630 FICO score."

How to Improve Your Score Before Applying

If you plan to buy a home or refinance soon, take these steps to boost your score:

1. Reduce Credit Card Balances

Your credit utilization ratio (how much credit you use compared to your total limit) should be kept below 30%—ideally below 10%—to maximize your score.

2. Check for Errors

Order a free copy of your credit reports from Equifax, Experian, and TransUnion. Look for incorrect late payments or credit lines that do not belong to you and dispute them.

3. Keep Old Accounts Open

The length of your credit history represents 15% of your FICO score. Avoid closing old credit cards, even if you do not use them, as they contribute to your average credit history length.