What mortgage rate will I get with my credit score? 

If your credit score is 740 or higher — and your finances are in good shape — you should be in line for some of the lowest mortgage rates on the market.

But that’s not a hard-and-fast rule. Some loan types offer below-market mortgage rates even with moderate credit scores. And many factors besides credit score impact your rate, too.

So explore all your options to make sure you’re getting the lowest rate possible for your credit score.

In this article (Skip to…)

• Credit tiers
• Examples
• Why credit matters
• Tips to lower your rate
• Check your rates

While each lender is free to set its own rules, many will follow conforming loan credit tiers set by Fannie Mae.

• ≥ 740 — Lowest mortgage rates
• 720-739
• 700-719
• 680-699
• 660-679
• 640-659
• 620-639
• < 620 — Highest mortgage rates

Fannie and Freddie Mac generally don’t lend to borrowers with scores below 620. If your score is lower than that, you’ll want to explore FHA loans (or VA loans, if you have a military service history).

Why your credit tier matters

The fact that lenders use credit tiers to determine rates is very important. It means you might be able to secure a lower rate without improving your score all that much.

Suppose your current score is 718 or 719. You’d have to move it up only a point or two to get yourself into a higher tier with a lower mortgage rate. And most of us can move our scores a few points within a month or two.

However, the opposite is true, too.

Lenders routinely make a final check on your credit score in the last few days before closing. And if your score has fallen into a lower tier, you might face a higher mortgage rate. So be careful not to open new credit lines, miss payments, finance big-ticket items, or do anything else that could harm your score prior to closing.

FICO, the biggest credit scoring company in America, has a handy online calculator that shows just how much mortgage rates vary by credit score.

As an example, here’s how average annual percentage rates (APRs) stacked up by credit score in early February 2022. Keep in mind that rates change constantly and will likely be different by the time you read this. These numbers are meant only as a sample to show you how much rates can vary.

Mortgage payments by credit score

According to the Mortgage Bankers Association, the average loan amount for a home purchase was $423,100 in December 2021.

We’ll use that loan amount, and the APR estimates from FICO (above), as an example to show how credit tiers impact mortgage payments and long-term interest costs.

If you compare the highest and lowest credit score tiers, the borrower with better credit saves about $390 per month and $140,000 in total interest over the life of their mortgage loan.

Of course, most people fall somewhere in between those two extremes. But the point is, your credit can have a big impact on both your interest rate and the amount of interest you’re paying to your mortgage lender.

If you’re able to boost your score before applying for a home loan, it could lead to serious savings over the next few decades.

And there can be real disadvantages to that. FHA loans are very popular and are good for many borrowers. But, unlike Fannie and Freddie’s mortgages, they charge mortgage insurance payments until you move, refinance, or finish paying off your loan.

Meanwhile, jumbo loans, which let you borrow millions, tend to have considerably higher credit score thresholds than other mortgages. Although some individual lenders may now be less demanding, even they will almost inevitably charge higher rates to those with lower scores.

Risk-based pricing

Conventional mortgage loans — the most common type of home loan — are also subject to ‘risk-based pricing,’ which factors your credit score into your rate and fees.

One federal regulator, the Consumer Financial Protection Bureau (CFPB), defines risk-based pricing thus:

“Risk-based pricing occurs when lenders offer different consumers different interest rates or other loan terms, based on the estimated risk that the consumers will fail to pay back their loans.

“Each lender uses its own process to determine the risk that you will default on a loan, but most use your credit score, employment status, income, and other outstanding debts, among other factors.”

That second paragraph is important. If each lender uses its own processes to decide on the risk you pose, you might get a better rate with the same score from one lender than another.

That’s why it’s so important to shop around for your mortgage. Every lender is different, and you won’t know which one can offer you the best rate until you’ve compared personalized quotes.

Comparison shopping for your mortgage can make a huge difference. The CFPB said in 2018, “Previous Bureau research suggests that failing to comparison shop for a mortgage costs the average homebuyer approximately $300 per year and many thousands of dollars over the life of the loan.”

But — before you even get to the mortgage shopping phase — you can work on improving your odds for a lower rate.

For example, if you save enough for a down payment that’s bigger than the minimum required, you might get a lower rate, even if your score’s unimpressive.

And the same applies if you have few existing debts. People with low debt-to-income ratios are more likely to be able to afford their new mortgage payments than those already struggling to stay afloat.

Lenders take both those factors into account, alongside your credit score, when deciding on the mortgage rate to charge you.

Tips to boost your credit score

And, of course, you can boost your credit score through your own efforts. Read for helpful tips.

You should also order a copy of your credit report from AnnualCreditReport.com. That site is owned by the Big 3 credit bureaus. And you’re legally entitled to a free copy of your report each year.

Many reports contain errors. And it can take months to get them corrected. So start the process early.

If you want to know what rate you qualify for, check with a mortgage lender. You can fill out a quick preapproval application that will give you a good idea of your interest rate, home buying budget, and future monthly payment.

Ready to get started?

Verify your new rate (Feb 2nd, 2022)