Your credit score plays a big role in the homebuying process. It’s one of the key factors lenders look at to determine which loan options you qualify for and what your terms might be. But there’s a myth about credit scores that may be holding some buyers back.

The Myth: You Need To Have Perfect Credit

According to Fannie Mae, only 32% of potential homebuyers have a good idea of what credit score lenders actually require.

That means two-thirds of buyers don’t actually know what lenders are looking for, and most overestimate the minimum credit score needed.

The Reality: Perfect Isn’t Necessary

But the truth is, you don’t need perfect credit to become a homeowner. To see the average score by loan type for recent homebuyers, take a look at the graph below:

There is no universal cut-off score. As FICO explains:

“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single ‘cutoff score’ used by all lenders, and there are many additional factors that lenders may use . . .”

So even if your credit score isn’t as high as you’d like, you may still be able to get a home loan. Just keep in mind, while perfect credit isn’t required to buy a home, your score can affect your loan options and the terms you receive.

Working with a trusted lender is the best way to understand what you qualify for.

Simple Tips To Improve Your Credit Score

If you want to expand your options after speaking with a lender, here are a few tips from Experian and Freddie Mac that can help improve your score:

1. Pay Your Bills on Time

This includes everything from credit cards to utilities and other monthly payments. A history of on-time payments shows lenders you’re reliable and responsible.

2. Pay Down Outstanding Debt

Reducing your overall debt improves your credit utilization ratio and makes you a lower-risk borrower. This can increase your chances of approval and better loan terms.

3. Hold Off on Applying for New Credit

Opening multiple new accounts in a short period can lower your score. Focus on strengthening your existing accounts instead.

Bottom Line

Your credit score doesn’t have to be perfect to qualify for a home loan. The best way to understand where you stand is to work with a trusted lender and explore your options.