It’s common knowledge that your credit score affects your ability to qualify for a mortgage. What’s less well-known is how much your credit score affects the interest rate you’ll pay.
What Is a Good Credit Score?
Credit scores are typically organized into ranges categorized as poor, fair, good, and excellent. A good credit score is generally considered to be 700 or above.
Credit scores help lenders assess the risk of lending money to a borrower. A higher credit score typically indicates lower risk — making it easier to access loans with favorable terms, lower interest rates, higher credit limits, and better chances of mortgage approval.
For many years, a FICO credit score of 720 or above gave you access to the best mortgage rates. That’s no longer the case — most lenders now require a score of 740 or even 760 before a borrower can qualify for their lowest rates.
How Do Credit Scores Affect Mortgage Rates?
Here’s how mortgage rates change on average depending on your credit score.
| Mortgage Rates by Credit Score (Most Recent Available Data) | |
| Credit Score | Average Mortgage Interest Rate |
| 760 to 850 | 6.24% |
| 700 to 759 | 6.46% |
| 680 to 699 | 6.39% |
| 660 to 679 | 6.85% |
| 640 to 659 | 7.28% |
| 620 to 639 | 7.83% |
According to Fair, Isaac & Co. — which developed the FICO credit scoring system — the best interest rates are available to borrowers with scores of 760 and above, up to a “perfect” score of 850. Just below that, borrowers in the 700–759 range can expect to pay about 0.2 percentage points more (20 basis points) on a 30-year fixed-rate loan, all other things being equal.
From there, interest rates increase for every 20-point decrease in score — roughly 0.2% more for each drop through the 680–699 and 660–679 ranges.
When your credit score drops below 660, the increases become more pronounced — a 0.43 percentage point jump for borrowers in the 640–659 range, and roughly another half percent for borrowers in the 620–639 range. Many lenders will decline applicants with scores this low for conventional financing.
Some lenders will still originate loans for borrowers with credit scores below 620, but the options are limited. If approved with a score below 620, expect to need a sizeable down payment — or substantial home equity if you’re refinancing. For conventional loans, Refi.com requires a minimum credit score of 620 for purchases and 620 for rate-and-term refinances.
How Much Do Credit Scores Affect Mortgage Rates?
As you can see from the table, credit scores can influence your mortgage rate by up to 2 percentage points. Here’s an example showing how that difference translates to real dollars.
Consider a $300,000 conventional loan with a 20% down payment of $75,000.
Under recent market conditions, a borrower with a 740 credit score could get a rate of 6.9% with no points on a 30-year fixed-rate loan — a monthly payment of about $1,976.
To obtain the same rate, a borrower with a 620 credit score would have to pay 4.14 discount points — adding $12,420 in upfront closing costs. Alternatively, that borrower could accept a higher rate of 8.134%, resulting in a monthly payment of $2,267.
An extra $291 per month may not sound dramatic, but over 30 years that adds up to nearly $104,760.
If your credit score is below your target threshold, it’s often worth waiting to improve it before applying. Conventional mortgage rates increase in measurable steps as credit scores decline — so a modest improvement near a cutoff can save you a significant amount over the life of the loan.
How to Check Your Credit
When preparing to apply for a mortgage or any other major loan, staying current on your credit report and score is essential. Here are two free ways to check:
- Credit Card Companies & Banks: Many credit card issuers and banks now offer free credit score checks as part of their services. You can typically view your score when logging into your online account, through the bank’s mobile app, or on your monthly statement. These checks usually display your most recent FICO score (updated monthly) and the credit bureau it came from.
- Credit Reporting Agencies: You can get a free credit report once a week from each of the three major credit bureaus (Experian, Equifax, and TransUnion) through annualcreditreport.com — the only federally authorized source for free reports from all three bureaus.
Credit Report vs. Credit Score
A credit report is a comprehensive record of your credit history — including payment history, account details, credit inquiries, and public records. A credit score is a numerical summary distilled from that report, condensing your creditworthiness into a single number. While the report offers a detailed view, the score provides a quick snapshot that lenders use to assess the risk of extending credit.
Regularly monitoring both is a good practice for staying informed about your financial health and catching any errors or fraudulent activity early.
How to Improve Your Credit Score
There’s no quick fix to improve your credit score, but consistently practicing the right habits will move the needle over time:
- Pay Bills on Time: Payment history is the single biggest factor in your credit score. Ensure all bills, loans, and credit card payments are paid on time every month.
- Reduce Credit Card Balances: Keep credit card balances low relative to your credit limits. A lower utilization rate positively impacts your score.
- Limit New Credit Applications: Multiple hard inquiries in a short period can lower your score. Be selective about applying for new credit.
- Regularly Check Your Credit Report: Review your report for errors or inaccuracies and dispute any discrepancies you find.
- Keep Old Accounts Open: Closing older accounts reduces your total available credit and can hurt your utilization ratio. Keeping them open also helps maintain a longer credit history.
- Diversify Your Credit Mix: Having a mix of credit types — such as credit cards and installment loans — can benefit your score as long as you manage them responsibly.
- Become an Authorized User: Being added as an authorized user on someone else’s account with a strong payment history can positively affect your own score.
Improving your credit score takes time, but the payoff is significant. Even a modest improvement near a key threshold can save you tens of thousands of dollars over the life of your mortgage.
Ready to put a stronger credit score to work? See if you qualify for a lower rate at Refi.com or start your application today.
