FICO Credit Scores: What They Are, Why They Matter, and How to Get a Mortgage
Your credit rating is essential in determining your ability to purchase a house. When contemplating a mortgage, you will frequently come across FICO credit scores.
At Gustan Cho Associates, we want to help you understand how FICO credit scores work, why they are important to mortgage lenders, and what steps you can take to improve your score and increase your chances of buying a home.
Click here to get approval for a home loan
What Are FICO Credit Scores?
FICO, which means Fair Isaac Corporation, is responsible for the most widely used credit scoring system in the United States. Credit scores are mainly used for evaluating a consumer’s creditworthiness by yielding a certain numerical score which is derived by the information which is contained in the person’s personal credit report with the combination of the person’s debt-to- income ratio. The lowest credit score a person can have is 300 and the highest FICO credit scores a person can have is 850. A good credit score is 720.
Here’s a quick breakdown:
- 800 and above: Excellent
- 740 to 799: Very Good
- 670 to 739: Good
- 580 to 669: Fair
- 579 and below: Poor
Most mortgage lenders use FICO credit scores to decide whether you qualify for a home loan and what interest rate you’ll pay.
Why FICO Credit Scores Are So Important for Mortgages
Your FICO credit scores are a way for lenders to see how likely you are to make your mortgage payments on time. The higher your score, the less risk you present. This usually helps you get better rates and terms. If your score isn’t great, don’t worry. At Gustan Cho Associates, we help people with less-than-perfect credit get approved.
Lenders also use FICO credit scores to:
- Approve or deny your mortgage application
- Set your interest rate
- Determine if you need to pay for mortgage insurance
This means that FICO credit scores affect how much house you can afford and how much you’ll pay every month.
How Your FICO Credit Scores Are Calculated
Your FICO score comes from five key pieces:
- Payment history (35%): Do you make sure to pay your bills on time?
- Amounts owed (30%): How much of your credit limit are you actually using?
- Length of credit history (15%): How long have your accounts been open?
- New credit (10%): Have you opened a lot of new accounts recently?
- Credit mix (10%): Got any different types of credit, like loans or credit cards?
If you want to improve your FICO credit scores fast, start by paying bills on time and paying down credit card balances.
FICO Credit Scores vs. Other Credit Scores
Not all credit scores are the same. You might see a different score when you check your credit with apps like Credit Karma, which uses the VantageScore model instead of FICO.
|
Scoring Model |
Range |
Used By Mortgage Lenders? |
Source |
|
FICO Score |
300-850 |
Yes |
All 3 Bureaus |
|
VantageScore |
300-850 |
No |
All 3 Bureaus |
|
TransRisk Score |
300-850 |
No |
TransUnion |
|
PLUS Score |
300-850 |
No |
Experian |
Only FICO credit scores are used by most mortgage lenders. So if you’re planning to buy a home, make sure you’re looking at your FICO score, not another version.
What FICO Credit Score is Required to Qualify for a Mortgage?
Every lender sets its own minimum score, but here are standard guidelines:
FHA Loan
If you’re buying your first home or have a lower credit score, don’t worry. You can get a loan with a credit score of at least 580; if you can put down 10%, it can even go as low as 500.
VA Loan
For active-duty service members, veterans, and some surviving spouses. No official minimum, but lenders usually prefer a score of 580+.
Conventional Loan
This is for people with decent credit and steady jobs. You’ll need a credit score of at least 620.
USDA Loan
For low to moderate-income buyers in rural areas. The minimum credit score is 640.
At Gustan Cho Associates, we work with over 210 wholesale lenders and offer no lender overlays. That means we follow agency guidelines only, which means more flexibility for you. Even if other lenders denied you, we may still get you approved.
Click here to get approval for a home loan with low credit scores
How FICO Credit Scores Affect Your Mortgage Rate
Your FICO credit score significantly influences your mortgage rate, which determines your monthly payments and the overall expense of your loan. An improved credit score may result in a reduced interest rate, potentially saving you money in the long run. If your credit score is 760 or higher, you might get a mortgage rate of about 6.25%. However, if your score drops to 620, your rate for the same loan could increase to 7.75%.
After 30 years, this slight variation can result in tens of thousands of dollars in additional interest.
Before applying for a mortgage, improving your credit score is important. A higher score can help you get a lower interest rate. This can significantly lower your total loan costs and your monthly payments.
How to Improve Your FICO Credit Scores
You don’t need to hire a credit repair company. In fact, during the mortgage process, credit disputes can hurt you and delay approval.
Try these proven steps instead:
- Pay all bills on time
- Pay down credit cards below 30% of the limit
- Don’t open new accounts unless necessary
- Avoid co-signing for others
- Monitor your report using services like Credit Karma (note: for monitoring, not for scores)
We also offer rapid rescore services that update your FICO scores in days—perfect if you’re on a tight timeline.
Can You Qualify for a Mortgage With Low FICO Credit Scores?
Yes! At Gustan Cho Associates, we help people get approved with low FICO credit scores every day.
Here’s how:
- Manual underwriting for FHA/VA loans
- Non-QM loans with no credit score minimums
- Alternative income verification programs
We understand that life happens: job loss, medical bills, divorce, or bankruptcy. That’s why we focus on your future, not your past.
What If My Score Is Dropping During the Mortgage Process?
Before closing, your lender will recheck your credit score. If your score goes down, you might face a higher interest rate, be required to have more reserves, or even lose your loan approval altogether.
To avoid this:
- Don’t open new accounts
- Don’t close credit cards
- Don’t max out cards or make late payments
- Don’t dispute accounts on your credit report during the mortgage process
Keep your finances steady and communicate with your loan officer if anything changes.
Final Thoughts: Take Control of Your FICO Credit Scores
Your FICO credit score can help you buy a home, or make it more complicated. The good news is that you control this more than you think.
Whether your score is 500 or 800, Gustan Cho Associates can help you get a mortgage. We guide you through rebuilding your credit, choosing the right loan, and closing on your dream home. Don’t let your FICO credit score hold you back.
Ready to Get Started?
If you’re ready to kick off your journey to owning a home, you can apply online in just a few minutes. Our team will review your FICO credit scores and determine which loan programs you qualify for. Don’t hesitate to call us today or click here to get pre-approved, even if you have low credit scores, and need a fast closing. At Gustan Cho Associates, we are committed to helping you buy a home, even if you’ve been told no elsewhere. Your path to homeownership starts here.
Borrowers who need a five-star national mortgage company licensed in 52 states with no overlays and who are experts on FICO credit scores, please contact us at 800-900-8569, text us for a faster response, or email us at alex@gustancho.com.
Frequently Asked Questions About FICO Credit Scores:
Q: What is a FICO Credit Score?
A: A FICO credit score ranges from 300 to 850. Lenders use this score to decide how likely you are to repay a loan. A higher score gives you a better chance of getting approved and can help you secure a lower interest rate.
Q: What’s a Good FICO Credit Score to Buy a Home?
A: A score of 720 or higher is good for loans. However, you can still qualify with a lower score. For FHA loans, the minimum score is 580. If you can make a larger down payment, you may qualify with a score as low as 500. At Gustan Cho Associates, we help people with low credit scores get approved daily.
Q: How is My FICO Score Calculated?
A: Your score is based on factors such as paying your bills on time, having debt, having credit for a long time, having new credit activity, and having different accounts.
Q: Why Do Mortgage Lenders Use FICO Scores?
A: FICO credit scores help lenders decide if you’re a good risk. Your score affects whether you get approved and what interest rate you get.
Q: How is a FICO Score Different from Credit Karma or Other Apps?
A: Credit Karma uses a scoring model called VantageScore, which most mortgage lenders do not use. Before buying a home, check your actual FICO credit scores.
Q: Can I Get a Mortgage with a Low FICO Credit Score?
A: Yes! We work with people with scores below 620, even as low as 500. We offer flexible options like manual underwriting and non-QM loans.
Q: How Can I Raise My FICO Score Quickly?
A: To improve your credit score, start by paying all your bills on time, paying down your credit card balances, and avoiding applying for new credit. We also offer quick rescore services to help raise your score quickly.
Q: Will My Mortgage Rate be Higher with a Low FICO Score?
A: Yes, your interest rate depends on your FICO credit score. A lower score means a higher rate, which increases your monthly payment and overall loan costs.
Q: What Happens if My Score Drops Before Closing?
A: If your score falls before your loan closes, you might lose approval or get a worse rate. Don’t open or close accounts or make late payments during the process.
Q: Can Gustan Cho Associates Help Me Even if I was Denied by Another Lender?
A: Absolutely. We have no lender overlays and work with over 210 lenders. Even if you were told no elsewhere, we might still approve you.
This blog about “FICO Credit Scores Requirements To Qualify For a Mortgage” was updated on July 8th, 2025.
