How your credit score band changes your rate

How does your credit score affect your mortgage rate?

A higher credit score usually gets you a lower rate, because lenders see less risk. But the change isn't smooth. On a conventional loan, scores are grouped into bands, often 20 points wide, and each band carries its own cost.

Moving up a band can lower your rate or the points you pay. Moving up within a band usually doesn't change anything. That's why it pays to know where your band ends.

Which credit score does a mortgage lender use?

The lender checks your credit with all three credit bureaus and gets a score from each. It uses the middle one. If your scores are 700, 720 and 735, your mortgage score is 720.

When two or more people are on the loan, the lender usually uses the lower of their middle scores for the rate. Adding a co-borrower with a weaker score can raise the rate, even if their income helps you qualify. It's worth comparing the loan with and without them.

Why is my mortgage score different from the score in my app?

Because mortgage lenders often use different scoring models than credit card apps and free score sites. The score you see online can be higher or lower than the one a lender gets, sometimes by a lot. Treat an online score as a rough guide until a lender checks your credit.

Does your credit score affect more than the rate?

Yes. On a conventional loan with less than 20% down, your score also sets the cost of mortgage insurance, and that cost drops as your score rises. Your score can also decide which loan programs you qualify for.

FHA loans are less sensitive to your score. FHA's mortgage insurance premium doesn't change with your score, which is one reason FHA can come out ahead for borrowers with lower scores.

How can you raise your credit score before you apply?

The quickest lever is your credit card balances. Scoring models look at how much of your available credit you're using, so paying cards down well below their limits before the statement closes can raise your score within a month or two.

Pay every bill on time, since a single late payment can lower your score for years. Avoid opening new accounts or closing old ones right before you apply. And check your credit reports for errors, because a wrong late payment or an account that isn't yours can be disputed and removed.

What if you're just below the next band?

Tell your Mortgage Advisor. Sometimes paying down one card balance is enough to cross into the next band. Lenders can often order a rescore after you pay it down, which updates your score in days instead of waiting for the next reporting cycle.

If your score is well below the next band, it may not be worth waiting. Compare what you'd save at the better rate with what waiting costs you. Live rates aren't your rate covers the other details that move your rate.

Quick answers

What credit score do mortgage lenders use?

Usually the middle of your three credit bureau scores. With more than one borrower, usually the lower of the middle scores.

How much does credit score affect a mortgage rate?

It depends on the loan, but rates change in steps as your score crosses into a higher band, often every 20 points on a conventional loan.

Will a few more points lower my rate?

Only if they move you into the next band. Within the same band, a few points usually don't change the rate.

What's the fastest way to raise my credit score for a mortgage?

Pay credit card balances down well below their limits before your statements close.