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Whether you’re applying for a credit card or a home loan, your credit score is a hot topic in the financial world. That’s because lenders use it to see how you handle debt and how likely you are to pay back the money they lend you.

Credit scores typically range from 300 on the lowest end and 850 at the top. When it comes to your credit score for a home loan, there isn’t one magic number that will unlock the door.

Different types of loans have different rules around the “right” credit score to buy a home, with some accepting lower scores—as low as no score at all—while others want 700 or more. Usually, the better the score, the better the loan terms.

In general, a higher credit score can lead to lower interest rates, which could save you a bundle over the life of your mortgage. A lower score might mean higher rates and tougher terms, making it a bit more challenging to get into your dream home.

Typically lenders check in with your credit score. For starters, they check in with the big three credit reporting agencies and collect your score from each one. That’s right—you technically have more than one credit score! The three major credit bureaus are Equifax®, Experian® and TransUnion®. Each agency uses a slightly different formula to determine your creditworthiness.

So, which of the three scores reigns supreme? If you’re applying on your own, the lender will use the median (or middle score) as your “official” credit score. If you’re applying for a mortgage with two or more people, the lender will typically go by the lowest median score of all the applicants.

There are a few special cases where the average score is used. For instance, if all borrowers are backed by Fannie Mae on a conventional loan, the lenders will average the median score of all the borrowers.

Let’s look at how credit score evaluation works:

Credit score evaluation in action

Let’s say you and another borrower submit a mortgage application together. If your median credit score is 600 and theirs is 700, most lenders would use your 600 score as the deciding number. That means the applicant with the lowest credit score may have the biggest impact on the lender’s decision.

In certain rare scenarios with Fannie Mae, lenders might average your credit scores together, making 650 the score they use to decide if you’re qualified. However, the lower median score of 600 would be used to decide your interest rate and mortgage insurance.

Yes, it is possible to buy a house with no credit history, but it can be more challenging. Without a credit history, traditional lenders may be hesitant to offer a mortgage because they use credit scores to assess a borrower's creditworthiness. However, there are alternative ways to demonstrate your ability to make mortgage payments:

1. Larger down payment: Offering a larger down payment can help mitigate the lender's risk, so it may make them more willing to work with you.
2. Manual underwriting: Some lenders offer manual underwriting where they look at alternative forms of credit and your financial history in more detail, such as rent and utility payments, to assess your creditworthiness.
3. Non-traditional credit report: You can also use a non-traditional credit report that includes payment histories for items not typically found in standard credit reports such as rent, utilities and insurance payments. This can help demonstrate your financial responsibility to lenders who accept these types of reports.
4. FHA loans: Federal Housing Administration (FHA) loans are more lenient regarding credit history requirements and may be an option if you can provide proof of steady income and other compensating factors. FHA loans also allow for the use of non-traditional credit histories.

So, you’re ready for a house, but your credit score isn’t? Don’t sweat it—we’ve got actionable ways to get that number into better shape.

1. Reduce existing debt

Lenders want to see that you can handle your current debt and have room to take on more. Chipping away at your existing debt not only feels good but can have a positive impact on your credit. If you have big credit card bills or student loans, keep paying them down until they’re off your plate.

This helps your credit from two angles: your debt-to-income (DTI) ratio and your credit utilization ratio. Your DTI ratio measures how much debt you owe versus how much money you have coming in. Your credit utilization ratio compares your spending to your credit limits. So, if you’re holding onto a high balance, lenders may assume you can’t handle any more debt.

2. Make payments on time

Reliability is something lenders love to see. When you build up a history of paying your bills on time, you look trustworthy, so your credit score could go up. This applies to all your bills, like electricity and phone bills, so it’s a good idea to stay on top of every expense.

3. Hold off on opening new lines of credit

To make a good impression, avoid applying for new credit accounts right before your mortgage application and during the approval process. If you do, your credit score could get dinged for hard inquiries on your credit report.

Let’s jump into credit score numbers that can crack the code on your dream house. Remember, there’s a range of scores and the goalpost can change depending on which loan and lender you’re interested in.

In general, a higher score will help you get lower interest rates and better loan terms, which will save you money over the life of your loan. Let’s cover the scores you need for some of the most common loan types.

Credit score by loan type

So, there’s your credit score, and then you have your FICO® Score. Confusing, right? Let’s break down the differences between the two.

FICO® score vs. credit score

A credit score is the general term for the numbers that lenders use to help determine your creditworthiness. Different organizations have their own methods of calculating credit scores, and they can use different scales, too.

On the other hand, a FICO® Score is a specific brand of credit score that most lenders swear by. Created by the Fair Isaac Corporation (that's where FICO® comes from), it uses a unique formula to evaluate your credit reports from the three major credit bureaus. Chances are, when you’re dealing with credit scores, most lenders will rely on the FICO® formula.

While your credit score gets all the glory, here are some other aspects of your financial fitness that influence a lender’s decision.

DTI ratio

Lenders look at your DTI (debt-to-income ratio) to see how you manage your debt while still having enough income to cover new loans or expenses. Basically, it compares the debt you owe, such as credit card payments, auto loans and student debt, to the money you earn each month.

Here’s a quick example: Let’s say your total debt payment every month is $2,000 and your monthly income is $4,000. You divide $2,000 by $4,000, turn it into a percentage, and there you have it: a DTI of 50%.

You want a DTI of 50% or lower to increase your chances of qualifying and locking in a great rate. A lower DTI means you have a healthy balance with your debt not sucking up too much of your income. A higher DTI means you have more debt weighing you down, making it harder to take on an additional loan.

LTV ratio

The LTV (loan-to-value) ratio measures how the home’s appraised value compares to the amount you’re borrowing on your mortgage. To calculate LTV, divide the loan amount by the home’s price and turn it into a percentage.

For instance, if you’re buying a house for $200,000 with a down payment of $40,000, you’d be asking for a loan of $160,000. That’s $160,000 divided by $200,000, resulting in 80% LTV.

Lenders want a lower LTV because it means you're putting more of your own money into the deal, which is less risky for them. In general, it’s best to hit an LTV ratio of 80% or less, which is why a down payment of 20% tends to be the gold standard for most home loans.

Your LTV ratio can work in your favor, too. Even if your credit score isn’t perfect, having a bigger down payment makes you more attractive to lenders and can help you avoid fees like mortgage insurance.

Income

This one is a no-brainer: how much you make plays into your house hunting budget and your mortgage options. Your income can narrow down which loans you’re eligible for and what kind of terms you’ll get. For example, FHA and USDA loans are reserved for lower-income borrowers and have income caps.

When it comes to loan terms, your income can affect your interest rate. When lenders see you make enough to comfortably cover your mortgage and other bills, they’re more likely to offer a lower rate. If your income is on shakier ground, you might get stuck with a higher rate because you’re a riskier borrower.

When you’re ready to apply, lenders will want proof of a steady paycheck, so get those bank statements, paystubs and W-2s ready to go. You want to show that your income measures up to the home’s price and leaves enough wiggle room for a mortgage.

Disclaimers

*Your FICO® Score is calculated based on data from your Equifax® credit report using the FICO® Bankcard Score 8 model and may be different from other credit scores. FICO® Score(s) are intended for and delivered only to the Primary cardmember and only if a FICO® Score is available. Disclosure of this score is not available for all Citi products and Citi may discontinue displaying the score at our discretion.

FICO and “The score lenders use” are registered trademarks of Fair Isaac Corporation in the United States and other countries. Your FICO® Score is provided for your own non-commercial personal review, use and benefit. Citi and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Citi and Fair Isaac do not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating.