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Home Loans and Your Credit Scores

December 4, 2023

credit reports

FHA mortgages (including purchase loans, One-Time Close construction loans, and FHA condo loans) have more forgiving credit score requirements for loan approval than some conventional mortgages, but you still need to work on your credit at least 12 months ahead of your home loan application for best results.

But some aren’t sure what scores to aspire to. Many finance blogs have varying advice on what to do about your FICO scores if they aren’t in the good or excellent range. 

But what do the major credit reporting agencies like TransUnion or Equifax say about “good” FICO scores? How do the bureaus interpret the numbers?

Experian’s Good FICO Scores

Experian notes, “To increase your odds of approval and qualify for a lower-rate mortgage, you should aim to have a credit score in the good range. That’s a FICO score of 670 or higher.”

That is true on paper, but even though FICO scores needed for the lowest FHA loan down payment are in the 580-or-better range, lender standards also apply.

What does that mean? Your lender may require a FICO score at 620 or better to qualify for more favorable home loan interest rates and terms. But not all do.

TransUnion On Credit Scores

The TransUnion official site says scores within the range of 721 – 780 are “good.” The company determines credit scores using the VantageScore 3.0 model. “If you get a credit score from TransUnion, it is a VantageScore 3.0 credit score,” according to the bureau.

VantageScore is a credit scoring method using a different approach to the data. For example, if you have multiple credit inquiries within a 14-day window on your credit report, they are treated as a single credit check.

However, multiple credit checks beyond the 14-day window may have a bigger effect on a VantageScore credit check process.

Equifax On FICO Scores

Equifax simply notes that it considers a good FICO score to be between 670 to 739.

Credit scores are a major part of the participating FHA lender’s process when it’s time to approve your loan and offer an interest rate and terms. The higher your credit scores, the more competitive the offer might be, assuming all other qualifications are met.

FICO scores are not the only issue. The amount of debt you carry, time spent on your current job, and the dependability of your income may also factor into the lender’s decision-making process.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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