Can i buy a house with a 650 credit score

A 650 credit score is considered fair. Your score helps lenders decide whether you qualify for products like credit cards and loans, and what interest rate you should pay.

The share of Americans with a score below 650 was nearly 25% as of April 2021, according to credit scoring company FICO. A 650 credit score is not considered "bad" by both FICO and its competitor VantageScore. Generally speaking, scores below 630 fall into the bad range.

Here’s how a 650 credit score can affect your financial life.

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With a 650 score, you may pay higher rates than others

As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.

Ways to beef up your 650 credit score

Credit scores change often based on your activity, so your 650 score can go up. Here are some tools you can use to build credit:

• Take your good credit habits to the next level: Pay all your bills on time and try to use no more than 30% of the credit limit on all your credit cards. Those are the two biggest factors affecting your credit score. The less you use of your available credit, the better it is for your score. Opening a new credit card that's used for one small recurring purchase can also help, just make sure to research eligibility requirements before applying. 

• Apply for a secured credit card, a type of card that's backed by a cash deposit.

• Visit your local credit union to get a credit-builder loan or secured loan. A credit-builder loan allows you to build your score and save up some money at the same time.

• Ask a family member or friend with a high credit score and long credit history to add you as an authorized user on their credit card. That gives you an additional line of credit on your credit report.

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Author: Dan Green | Last Updated: October 31, 2022

Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.

You need at least a 620 credit score to buy a house with a conventional loan in 2022. But, you’ll find that there are several other loan types that have much lower requirements.

Many first-time home buyers worry that their credit scores are too low to buy a home. First, know that whether your credit score is “good” or “bad” is subjective and won’t affect your home-buying. Second, mortgage lenders are bound by specific rules which determine what credit scores you need to buy a house, and those rules vary by your loan type.

Conventional loans are the most common loan type. On the credit score scale, which ranges from 350-850, conventional loans require a credit score of at least 620. Other loan types allow for lower credit score minimums, and some mortgage programs have no credit score requirement whatsoever.

Here’s what credit score you need to buy a house.

The Minimum Credit Score Needed to Purchase Your First Home

Table of Contents

• →  Minimum Credit Score Needed to Buy a House by Loan Type
• →  What Changes Your Credit Score?
• →  How to Improve Your Credit Score
• →  What Mortgage Lenders Look For When Approving a Home Loan
• →  How to Buy a House With Bad Credit
• →  Our Advice – Get pre-approved to find your true credit score

Minimum Credit Score Needed to Buy a House by Loan Type

Conventional Loan | Credit Score: 620

Conventional loans are the most common home loan and have a hard minimum credit score of 620. Conventional loans are issued through mortgage lenders, mortgage brokers, and credit unions. Conventional loans are the default option for home buyers because of their low rates and simple approvals.

Conventional loan approval requires:

• A mortgage application
• Lender-required documents
• Credit history
• Current credit score

Check your eligibility for a conventional loan.

FHA Loan | Credit Score: 580

FHA mortgages are the original mortgage loan, developed by the Federal Housing Administration in the 1930s to keep homeownership attainable. FHA loans are more inclusive than other loan options because of their relaxed down payment requirements, and because the FHA doesn’t change your interest rate based on your credit score.

In fact, FHA loans don’t require home buyers to have a credit score at all, although many lenders want to see a minimum score of 580.

FHA loan approval requires:

• 3.5% down payment
• Loan lengths must be 15 years or longer

Check your eligibility for an FHA loan.

VA Loan | Credit Score: 580

VA loans are backed by the Department of Veterans Affairs. VA loans are affordable home loans for active-duty servicemembers and veterans.

Because the VA guarantees its loans against losses, mortgage lenders make VA loans at very low-interest rates and, historically, VA mortgage rates are often the lowest of all available mortgage loans. VA loans don’t require a down payment.

VA loans:

• Are available as 100% mortgage loans
• Have lower interest rates as compared to conventional loans
• Require a Certificate of Eligibility (COE)

Check your eligibility for a VA loan.

USDA Loan | Credit Score: 580

USDA loans are government-backed mortgages available for homes outside of densely-populated areas. The USDA program covers about 91% of the U.S. including rural areas, small towns, and many suburbs.

USDA mortgage loans don’t require a down payment and offer interest rates that average 0.50% lower than conventional loan rates. USDA guidelines require credit scores of at least 580, but exceptions can be made for home buyers with extenuating circumstances.

USDA loans:

• Can only be used for non-urban home purchases
• Have no down payment requirements
• Require a credit score of 580 or higher

Check your eligibility for a USDA loan.

Jumbo Loan | Credit Score: 680

Jumbo loans service home buyers whose mortgage loans are too large for the local mortgage loan limit. There is no specific credit score requirement for a jumbo mortgage, though higher scores are more likely to be approved and may be assigned a lower interest rate.

Jumbo loans can be used for a variety of property types.

Jumbo loans:

• May require a down payment of between 5% and 25% depending on credit and income
• Require higher credit scores
• Are not government-backed

Check your eligibility for a jumbo loan.

What Changes Your Credit Score?

Credit scores help your lender determine the likelihood that you’ll make timely mortgage payments. Fair Isaac and Co. (FICO) uses these factors to calculate your credit score:

1. Your payment history (35%)
2. Your current credit usage (30%)
3. The length of your credit history (15%)
4. Types of credit (10%)
5. Recently opened credit lines (10%)

These 5 factors provide a glimpse into your financial habits and history and help lenders assess your financial health.

Home buyers with lower credit scores are typically assigned a higher interest rate.

There is no way to get around a credit check. It is one of the things you need to buy a home during the mortgage pre-approval stage so be sure to learn more about how a mortgage pre-approval affects your credit score.

How to Improve Your Credit Score

To boost your credit score for your upcoming mortgage approval, first, check your credit report to learn what’s comprising your score. All consumers get access to a free annual credit report at AnnualCreditReport.com.

You can also check your credit score by getting pre-approved.

If you’ve never reviewed a credit report, it can feel overwhelming. There are public resources that can help you, or you can ask for help in our chat. We’ll consider the factors that impact your credit score and discuss ways to make improvements, like opening a secured credit card account or shifting balances between charge cards.

Here are the best habits to improve your credit score:

• Pay your bills on time — Payment history accounts for 35% of your FICO credit score
• Lower your credit utilization — Increase your debt payments temporarily or request a credit limit increase
• Avoid new credit lines — Hard credit inquiries are performed for a new line of credit and can affect your credit score for the next six months
• Don’t close old accounts — Keep old credit lines open and catch up on old payments or delinquencies
• Be patient — It can take up to 6 months to make big changes in your credit score, so do the work and wait it out
• Use a credit builder app — StellarFi helps build credit through positive payment history by reporting all recurring bills to Experian®, TransUnion®, and Equifax®.

Credit scores don’t improve overnight, and keeping your debt to a minimum pays off when you’re planning to buy a house. Even small credit score improvements can reduce the interest rate you get, which saves you tens of thousands of dollars in the long run — enough to fund a retirement or college tuition!

Learn more about how to fix your credit to buy a home.

What Mortgage Lenders Look For When Approving a Home Loan

When you apply to get pre-approved, your lenders will review your credit history and consider your current credit outlook. This includes looking at:

• How on-time have you been with your payments and obligations?
• What does your current debt load look like, and how is it spread out?
• How much experience do you have managing credit?
• Have you been recently trying to acquire access to new sources of credit?
• Do you let items go into collections?
• Have you previously filed for bankruptcy?

Lenders ask these questions to get comfortable with you. Your financial health isn’t the only consideration lenders make, but how you manage your bills tells a large part of your story.

Lenders also look for specific credit events known as derogatory items, like bankruptcy or delinquent accounts.

Derogatory items don’t disqualify a mortgage approval. Generally, it’s only required that they’re historical events and not current ones. For example, you can get approved for a mortgage if you’ve declared bankruptcy in the past, or if you’ve lost a home due to foreclosure.

Lenders know that life is unexpected and bad things happen. What’s important is what’s happened in the time since the derogatory event occurred.

How to Buy a House With Bad Credit

You don’t have to give up on your dream of homeownership because of a low credit score or less-than-perfect credit history Here are a few ways first-time home buyers buy homes with bad credit or no credit:

1. Cancel Out Your Low Credit Score With A Larger Down Payment

Low credit scores create risk for mortgage lenders, and large down payments take the risk away. Therefore, buyers with the ability to increase their down payment size are more likely to get mortgage-approved.

2. Ask Multiple Lenders

The U.S. government establishes rules for conventional, FHA, VA, and USDA loan approvals, but  mortgage lenders sometimes create additional, more stringent requirements to be met. If your mortgage application doesn’t pass its first test, try again with a different mortgage lender. It’s common for loans to be approved on the second or third attempt.

3. Get a Co-Signer

If you’re unable to qualify for a mortgage and have somebody in your life who would serve as co-signer, ask your mortgage lender the best path forward. A co-signer is somebody who agrees to joint responsibility for your mortgage, including repayment.

Co-signers don’t have to live with you, but they will share ownership of the home. If you can’t qualify on your own, then this is worth exploring.

Learn more about options for buying a home with a low credit score.

Our Advice – Get pre-approved to find your true credit score

Your credit score isn’t the only factor for mortgage approval. However, it’s a key indicator of your financial health. Track your credit, make on-time payments, and get help to choose the home loan that’s right for you. Chat with us if you have questions about your credit score and loan options.

Happy homebuying.

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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