How Credit Score Affects Your Mortgage Rate

Credit scores directly impact mortgage interest rates. A difference of just 100 points could cost, or save, you thousands.
By NerdWallet 
Updated
Edited by Mary Makarushka Reviewed by Michelle Blackford

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Without a high credit score, you won’t qualify for the best mortgage rates available, which could mean you’ll end up paying more money over the term of your mortgage. The difference between 3% and 3.25%, for example, can add up, especially if you’re applying for a 30-year fixed-rate mortgage.

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Why your credit score matters to lenders

Along with a low debt-to-income ratio and a strong financial history, you’ll need a high credit score for the lowest mortgage rates. Why?

You’d probably hesitate to lend money to a friend who usually takes forever to pay you back — or doesn’t pay you back at all. Lenders feel the same way about mortgages. They want to lend to people who have a record of on-time payments to creditors.

Lenders rely on credit scores as an indication that a borrower will meet obligations. A higher credit score, experts say, reassures lenders that they will be paid back.

Your credit score is calculated most often with the FICO scoring model and is derived from the information on your credit reports, which are compiled by credit reporting companies. Your reports include a history of your payment habits with borrowed money.

Your credit score is “one of the most important parts to qualify, but it is a part,” says Michelle Chmelar, vice president of mortgage lending with Guaranteed Rate in New York. “You have to have the whole package: income, sufficient assets and credit.”

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620

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Mortgage loans from our partners

New American Funding - PURCHASE logo
Check Rate

on New American Funding

New American Funding

4.5

NerdWallet rating 
New American Funding - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
500

Min. down payment 
3.5%

Check Rate

on New American Funding

Better - PURCHASE logo
Check Rate

on Better

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4.5

NerdWallet rating 
Better - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

Check Rate

on Better

NBKC - PURCHASE logo
Check Rate

on NBKC

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4.5

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NBKC - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
3%

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on NBKC