Lenders take a look at your credit score whether you pursue an FHA loan or a conventional loan. Your credit score is a three-digit number that represents the amount of risk a lender takes on when you borrow money. Your credit score could range from excellent (800 and above) to poor (350 – 579), and it’s based on your credit history, among other factors. The higher your credit score, the less of a risk you are and the lower rate you’ll qualify for. Most lenders look at your FICO® Score, a credit scoring model developed by the Fair Isaac Corporation, which ranges from 350 points (low) to 850 points (high). Lenders may also use VantageScore®, another type of credit scoring model. Your credit score and information are reported by each of the three major credit bureaus: Experian™, Equifax® and TransUnion®. Your score may vary among credit bureaus.
If you're applying as a sole borrower, the median score among the three is considered the qualifying score. If you're applying with another borrower, the score that’s generally considered is the lowest median score between multiple clients. There’s one notable exception we'll get to below.
The following factors are taken into consideration to build your score:
- Whether you make payments on time
- How you use your credit
- Length of your credit history
- Your new credit accounts
- Types of credit you use
So, what credit score do you need to get a loan? That depends on the type of loan you’re after.
Conventional Loan Credit Score Requirements
Credit score requirements for a conventional loan vary depending on the lender. However, you generally need a minimum credit score of 620 to qualify for a conventional mortgage. This is based on your median score as an individual. If you have a co-borrower, Fannie Mae often looks at things a little differently than other mortgage investors. They take the average median score of all borrowers on the loan rather than the lowest median score. This can make it easier to qualify.
If your co-borrower has a median score of 580 and you have a median score of 720, in the past, both incomes couldn't be used to qualify for a conventional loan. Now Fannie Mae averages the two, making the qualifying score 650.
It's important to note that for your interest in mortgage insurance cost, the lowest median score is still what counts, so you could have a slightly higher rate. Additionally, this doesn't apply to every loan option offered by Fannie Mae.
FHA Loan Credit Score Requirements
You can qualify for an FHA home loan with a credit score as low as 500, but it does come with strings attached. For example, you need to be able to put 10% down to get an FHA loan with a credit score of 500.
The higher your credit score, the lower your down payment needs to be for an FHA loan. Generally, most FHA loan lenders (including Rocket Mortgage) require borrowers to have a credit score of 580 and above. The qualifying credit score is the lowest median score if you have a co-borrower. If you're an individual, it's your middle score.
