It can be frustrating wondering exactly what’s in your credit report, how it shapes your score and how such a simple number could affect buying a home.

If you’re ready to see where you stand and how your credit score affects buying a home, explore our Digital Mortgage Pre-approval today!

What is a credit score?

A credit score is a three-digit number, usually between 300 and 850, that reflects to lenders how well you manage debt. Lenders use it to assess your reliability in repaying loans. A higher score could improve your chances of getting favorable mortgage terms.

Where do credit scores come from?

Credit scores are based on data from credit reporting agencies Experian, Equifax and TransUnion. Lenders use different credit scoring models to assess borrower risk.

Which factors determine my credit score?

Your credit score is shaped by these key factors.

• Payment history: Payment history accounts for 35% of your credit score. Making on-time payments is critical, as even one missed payment could lower your score.
• Credit utilization ratio: Your utilization rate is how much credit you use compared to your total credit limit. Ideally, keep it under 30%. For example, if your credit limit is $10,000 and your credit card balance is $3,000, you're using 30% of your available credit.
• Length of credit history: The longer your credit history, the better. If you’ve had a credit card for, say, 10 years and managed it well, it enhances your credit worthiness.
• Types of credit used: Lenders like to see a credit mix — credit cards, mortgages, auto loans and student loans. A diverse credit profile demonstrates your ability to handle various financial responsibilities.
• Recent credit inquiries: Every time you apply for credit, your report will show a “hard inquiry,” which could slightly lower your score. Multiple hard inquiries in a short time might raise concerns for lenders.

What goes on my credit report?

Here’s what lenders will find in a credit report.

• Personal information: This includes your name, address, Social Security number and employment information. While it doesn’t affect your score, it’s important to ensure this information is accurate because errors could lead to delays, identity verification problems and identity theft risks.
• Credit accounts: Your credit report lists open and closed credit accounts, such as credit cards and loans, along with balances and payment history.
• Public records: Bankruptcies, foreclosures and court judgments appear here and could raise red flags for lenders.

How can I see my credit report?

Follow these steps to access your credit report.

• Visit AnnualCreditReport.com: This is the official website that allows you to get free credit reports once every 12 months from each of the three major bureaus: Experian, Equifax and TransUnion.
• Choose your credit bureau: Select which bureau’s report you want to see. You can see all three at once or spread them out over the year for regular monitoring.
• Verify your identity: You’ll need to answer security questions and provide personal details, including your Social Security number, to verify your identity.
• Download or view your report: Download or view your report online, review it carefully for accuracy and note potential issues.

What qualifies as a good credit score?

Lending institutions may use different credit scores depending on their requirements. Generally, a score above 670 is considered good, over 740 is classified as very good, and anything 800 or above is considered excellent. The higher your score, the more options you’ll have for mortgages, personal loans and other loans.

Is 700 a good credit score?

While it’s not in the excellent range, a score of 700 falls within a good credit score range. It’s high enough for you to be seen as a reliable borrower and could improve your chances of securing competitive mortgage rates and terms.

Is a 900 credit score possible?

A credit score of 900 may sound like a myth since most credit scoring models cap at 850. However, it’s possible to hit 900 in some models.

What are the benefits of a good credit score?

A good credit score offers more than just better loan rates. Here are some additional ways it could improve your financial life.

• Lower insurance premiums: Insurance companies often use credit scores to assess risk. A higher score could result in lower premiums for auto, home and even life insurance.
• Easier rental approval: Landlords often check credit scores when evaluating potential tenants. A strong credit score could help you secure a rental without providing extra guarantees.
• Access to premium financial products: With a good credit score, you could qualify for a broader range of financial products, including credit cards with higher rewards and lower interest rates, as well as more favorable mortgage loan terms.

How does my credit score affect loan eligibility?

A higher credit score could make you eligible for more favorable mortgage rates and terms. Here are the minimum credit scores for various mortgage options.

• FHA loans: Government-backed FHA loans are popular among first-time homebuyers because of their more lenient credit and down payment requirements. At Rate, you could qualify with a credit score as low as 500.

With a score of 500, you could qualify for an FHA loan with down payment options starting at 3.5% of the home's purchase price, making it easier for you to enter the housing market.

However, it's important to note that FHA loans require mortgage insurance premiums, which will increase your monthly payment.

• VA loans: VA loans also backed by the government are available to veterans as well as active-duty military members and their eligible spouses. They tend to have lower interest rates compared to conventional loans, which could save borrowers thousands of dollars over the life of the loan.*

These loans often come with no down payment and don’t require mortgage insurance.

Rate does not have a minimum credit score for VA loans.

• Conventional loans: Conventional loans, which are not insured by the government, usually come with stricter credit requirements.

Most lenders require a minimum credit score of 620, but those with scores of 700 or higher will likely qualify for better terms, such as lower interest rates and higher loan amounts.

How much can I borrow with a 700 credit score?

With a credit score pf 700, your credit risk is considered low, so you could secure better interest rates and loan terms than someone with a lower score. You could even qualify for other financial products or a new line of credit.

How long do items stay on your credit report?

Here's how long negative marks can linger on your credit report and what you should know about their effects on your ability to borrow.

• Late payments: Late payments stay on your credit report for up to seven years from the date of the missed payment.

The effects diminish over time, but a late payment could significantly hurt your credit score, so making consistent on-time payments is key to mitigating the damage.

• Bankruptcies and foreclosures: Bankruptcies and foreclosures are more serious negative items that could stay on your credit report for seven to 10 years, depending on the type.

Chapter 7 bankruptcy, for instance, remains for 10 years, while Chapter 13 bankruptcy typically lasts for seven years.

These items could seriously affect your ability to get credit, but their influence decreases as time passes and you rebuild positive credit behavior.

How can I build my credit score?

These strategies will help you maintain and improve your score over the long term.

• Open your first credit account: If you’re looking to build credit, consider a secured credit card or credit-builder loan. To demonstrate creditworthiness, use them responsibly and avoid credit card debt.
• Pay off debts: Paying off debts is one of the best ways to boost your credit score. It also frees up your income to allow you to focus on saving or investing.
• Maintain a low debt-to-income ratio: Debt-to-income ratio (DTI) measures the percentage of your monthly income used to repay debt. Most lenders prefer a DTI ratio below 36%, ensuring you have enough income for other financial obligations.

How long does it take to rebuild my credit score?

Rebuilding a credit score depends on the severity of the issue. You can see improvement in three to six months with good practices, but it could take seven to 10 years to fully recover from a major setback such as a foreclosure.

How can I improve my credit score in 30 days?

Improving your score is usually a long-term process, but paying down large debts such as car loans and correcting credit report errors can provide a quick boost.

How does my credit score affect my ability to buy a house?

A higher credit score makes it easier to qualify for a mortgage with a lower interest rate, and even a slight interest rate difference could save you thousands over the life of a loan.

Does applying for a mortgage hurt my credit score?

Yes, applying for a mortgage through pre-approval could temporarily affect your credit score. The pre-approval process involves a “hard inquiry,” which could lower your credit score by five to 10 points.

However, if you manage your credit responsibly, your score should recover within a few months.

Can I get a mortgage pre-approval without a credit check?

Unfortunately, no. Pre-approval always requires a hard credit check because lenders need to review your financial history to determine your eligibility for a loan.

However, if you're worried about the effect on your credit score but still want an estimate of how much you might be able to borrow, you could consider pre-qualification.

Pre-qualification is a less formal process that doesn’t involve a credit check. Instead, it’s based on self-reported information, such as your income and assets, and could give you a rough estimate of your borrowing capacity.

How many times can I check my credit score without hurting my credit?

Checking your own credit score, known as a "soft inquiry," does not affect your score. You can check your credit score for free as often as you like without any negative consequences.

In fact, monitoring your score regularly is a good financial habit that can help you spot potential issues early.

Does closing a credit card hurt your credit?

Yes, closing a credit card account could reduce your available credit, increase your credit utilization rate and shorten your credit history.

However, being an authorized user on another account could help maintain a longer credit history even after closing an account.

How does identity theft affect my credit score?

Identity theft occurs when someone steals your personal information to commit fraud or other crimes. This can seriously damage your credit as thieves can open accounts, take out loans or make purchases in your name.

How can I be sure I haven’t been the victim of identity theft?

Use credit monitoring services to monitor your credit report for new accounts or inquiries you don’t recognize and investigate immediately if something seems off.

What should I do if my Social Security number is stolen?

If your Social Security number is stolen, contact Experian, Equifax or TransUnion to place fraud alerts, file a report with the Federal Trade Commission (FTC) and notify your bank. Speed is crucial in preventing further damage.

How can I start the mortgage process today?

Once you understand what’s in your credit report and how it affects your credit score, the next step toward homeownership is pre-approval.

Pre-approval helps you set a clear home budget, boosts your credibility with sellers and gives you an advantage in competitive markets.

- Rate.com -