Qualifying for a home loan requires many variables, one of which is your credit. Since credit requirements are stricter than they were in the past, credit scores are usually the first items considered by your lender when applying for a mortgage. Today we’ll show you why when securing a home loan, credit scores matter and can inevitably cost you or save you money.

What are Credit Scores?

A credit score is a three-digit number derived from the information that appears on your credit report. This number is used to assess your creditworthiness and how likely you are to repay your debts on time. Most consumers have three credit scores, which can be the same, but are usually different and range between a low score of 300 and a high score of 850.

Since credit scores help determine the relationship between a consumer and a business, they’re often considered the most important element of your entire financial history. 

How Does My Credit Score Affect My Mortgage?

When examining your credit report, your lender will use the middle score of the three scores. Higher scores represent the least risk for the lender while lower scores represent the most risk.

Credit_Affect_MortgageDue to the risk involved, each mortgage program has a minimum credit score that’s considered acceptable. Having a very low score can disqualify you from obtaining a mortgage or place you into a specific mortgage program that accepts lower scores. At ditech, loans like an FHA Loan or VA Loan allow for less-than-perfect credit. If your score is within the range that’s satisfactory, your lender may pursue the qualification process.

Credit scores are also used to determine your mortgage rate. A low score will cost you more in interest because the lender’s risk is higher. Therefore, the rate will be higher. On the other hand, a high credit score can help save you thousands of dollars in interest over the life of the loan because the rate will be lower.

What Should I Do to Improve My Credit Score?

At all times, you should be monitoring and managing your credit scores. It becomes even more important if you plan to buy a home or refinance an existing home. Using credit wisely and responsibly is the first key to obtaining good credit scores. Even though debt is needed to create a credit score, it’s important to pay your debts on time and with the intention of eventually paying them in full. By reducing the amount of debt you carry, you’ll ultimately increase your scores.


Your credit report and credit scores are a comprehensive trail of your financial history. Through this, your lender sees how you handle your debts and if you act responsibly with your finances. This will determine whether you’re considered a high or low risk, or one not worth taking. Therefore, it’s an important part of everyone’s life that should be handled with care.

A ditech Home Loan Specialist can help you determine how to improve your credit scores for a home purchase. Find a Home Loan Specialist now.

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