While it may take some time, you can improve a low credit score to buy a house by staying current on your payments and keeping your credit utilization in check.

Your credit score has a huge impact on whether you’ll qualify for a mortgage and what the terms of that mortgage will be. The higher your score, the better those terms will likely be.

Unfortunately, sometimes life happens—an emergency on an already tight budget or a string of too many impulse buys can cause your credit score to suffer.

While having a low credit score can feel discouraging, especially if it’s getting in the way of your ability to buy a house, credit scores aren’t static—they’re ever-changing, and there are actions you can take that will bring it up over time.

That’s why

Jerry

, the

licensed insurance broker and super app

that helps you save on

home insurance

, is here to give you the rundown on what goes into a credit score—and how you can improve it so you can purchase a house of your very own.

What is a credit score, and how is it determined?

A credit score is essentially a report card that looks at your spending and borrowing habits. Mortgage lenders use credit scores as one of their criteria to help them determine whether you can reliably make payments and whether you’ve done so in the past.

A higher credit score can often land you better mortgage terms like lower interest rates because mortgage lenders will consider you less of a risk and assume that they are more likely to get their money back.

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What’s included in a credit report?

There’s a lot of information that goes into a credit report to give lenders a complete look at your debt and spending history. The following are factors that come into play when your credit score is calculated:

Payment history: Your payment history holds the most weight when it comes to calculating your credit score. Consistently making on-time payments will help your credit score while missing payment due dates will bring it down.

Current debts: Another significant influence on your credit score is how much outstanding debt you have, as well as your credit utilization (the portion of your credit limit(s) you tend to use). If you have high loan balances or you’re regularly maxing out your credit card’s limit, your credit score could take a hit. It’s generally recommended to stay within 20-30% of your credit limit. So, if you had a credit card with a $5,000 limit, you’d want to limit your monthly expenses on that card to $1,000-$1,500—and only charge it if you can pay it off!

Diversity of account types: Having a variety of recurring account types, like credit cards, home payments, and car payments, can yield a higher credit score.

Length of your credit history/ages of your accounts: Your credit score also will take into account how far back your borrowing and spending habits go. This is a common obstacle for young adults trying to qualify for mortgages since, in the eyes of lenders, it’s harder to gauge long-term habits. If you can keep making on-time payments over the long term, though, you should see your credit score improve over time.

Most recent activity and habits: Your most recent spending activity can help or hurt your credit score. If you recently took out a new loan or have been charging a little too much to your credit cards lately, you might want to reign in your spending habits for a while to minimize the impact on your score.

Three different credit bureaus will give you a credit score based on the above information: Experian, Equifax, and TransUnion. Your score with each credit bureau can vary somewhat depending on what agencies have sent information and how they weigh the variables. Typically, however, your credit score with each one should fall within a similar range.

MORE:

How does your credit score affect car insurance?

Is my credit score good?

A good credit score may not be as easy to define as you would think. It often depends on the lender’s requirements for the type of loan you’re trying to qualify for. Having a credit score of 620 or higher is generally considered a healthy place to be if you’re trying to get a mortgage for a house.

Typically, credit score ranges are assessed the following way:

Credit score range	What it means
800-850	Your score is exceptional! As a member of this upper echelon, you’re likely to qualify for the most ideal mortgage terms available from your lender.
740-799	Very good—you’re considered a reliable borrower and spender, and lenders are likely more inclined to offer you better mortgage terms.
670-739	Good—the average U.S. credit score falls within this range. You’re considered an adequate, reliable borrower, and if your other borrowing requirements are in good shape, you shouldn’t have much difficulty qualifying for a mortgage.
580-669	This range is considered fair. It might be more difficult for you to qualify for a mortgage, but it’s not necessarily impossible. A lender who approves your mortgage might offer you subprime borrowing terms when compared with those offered for higher credit scores.
300-579	Poor credit score—borrowers with credit scores in this range will often see mortgage applications declined without a cosigner. Be wary of predatory mortgage offers that offer infeasible terms.

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MORE: What is a good credit score for a car loan?

How to fix my credit score to buy a house

It can be incredibly frustrating to be struggling with a low credit score while you’re trying to buy a house, especially if it was influenced by factors that were out of your control. To make matters more challenging, it’s possible for negative information that shows up on your credit report to stay there as long as 7 to 10 years.

Still, while it may take some time, it doesn’t mean your credit score will be stuck in the basement forever. You can counteract the effects of earlier delinquent payments by establishing a more reliable spending and borrowing history.

If your current credit score is getting in the way of your ability to buy a house, here are a few steps you can take:

Check your credit report to find out what’s weighing down your score, and look for any errors. You’re entitled to a free credit report check each year, thanks to the Fair Credit Reporting Act. If you do find mistakes, be sure to report them to that reporting agency.

Make at least the minimum payment on your accounts. Your payment history holds the most weight in determining your credit score. If you’re making at least the minimum payments on your accounts on time each month, they’ll be considered in good standing, and your credit score will benefit as a result.

Reduce high-balance debt. Easier said than done, right? Having debt doesn’t necessarily deem you a high-risk borrower, but if you’re able to pay a little extra each month on a high debt balance and keep your credit utilization within an acceptable range, your credit score may thank you.

Avoid taking on new debt. Applying for new loans often requires a hard credit check, which will pull down your credit score. It also can raise red flags if a lender sees you’re applying for multiple types of loans within a short period. That extra monthly payment could negatively affect your debt-to-income ratio, another significant factor that influences whether you’ll qualify for a mortgage.

Consider consolidating debts. Despite the above point, taking out a new loan to consolidate your existing debts and combine them into a single, more manageable monthly payment could be a good move in certain circumstances. While your credit score might take an initial hit it will go up if you stay consistent with your monthly payments over the long term. You’ll want to compare the terms of your new loan to your existing ones when deciding whether it’s the right choice for you.

MORE: Does refinancing a car hurt your credit score?

Credit score needed to buy a house

What’s the minimum credit score needed to buy a house? Well, if you had the cash on hand to buy a home outright, you technically wouldn’t need to worry about a credit score at all. However, for most homebuyers, that’s just not feasible, and they require the help of a mortgage to purchase a home.

The minimum credit score needed to qualify for a mortgage can vary from lender to lender, and it can also vary depending on the type of loan being offered.

Generally speaking, you’ll typically need a credit score of 620 or higher to qualify for a conventional mortgage. To qualify for an FHA loan, which is backed by the U.S. Federal Housing Administration, you’ll need a credit score of at least 580.

You might be able to find mortgages with a lower credit score, but they can often come with less ideal terms—like higher interest rates—so keep that in mind as you’re exploring your options.

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How to find car and home insurance quotes online

Finding the right home insurance

Turning a low credit score around can take a lot of time and effort. When you’re finally able to land a house of your own, don’t let all your hard work go to waste—make sure it’s protected by the right

homeowners insurance

policy.

With the

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Here’s how it works. Jerry will get the details of your home insurance from your current provider, cutting down on the mountain of questions you’d have to answer otherwise. After answering a few quick questions yourself, Jerry will use all this info to show you customized quotes from top providers, allowing you to compare your options in an instant—and all in one spot.

And it’s not just time you’ll save—Jerry can help you

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FAQs

What credit score is needed to buy a house?

The minimum credit score needed to buy a house will vary depending on the lender and their requirements for the type of loan you’re hoping to qualify for. Generally speaking, it’s reasonable to expect a private lender to want to see a credit score of 620 or higher for a conventional mortgage, while an FHA loan requires a credit score of at least 580.

Can you tell me how to fix my credit score to buy a house?

Making on-time payments, limiting new debt, and reducing high-balance debt are just a few ways you can improve your credit score to buy a house.

Do insurance payments affect your credit score?

Insurance payments generally don’t affect your credit score. However, if you have overdue insurance payments, this could lower your credit score if they’re sent to collections.

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