This Is The Average First-Time Home Buyer’s Credit Score. How Does Yours Compare?

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Hint: It’s a pretty decent score, and one you might be happy with.

Key points

  • It takes a minimum credit score of 620 to qualify for a conventional mortgage.
  • The average recent first-time home buyer had a much higher credit score than that.

Most first-time home buyers aren’t in a position to buy property outright in cash. Rather, they rely on mortgages to finance their home purchases.

The higher your credit score is at the time you apply for a mortgage, the more competitive an interest rate you’re likely to snag on that loan. It pays to get your score into the best shape possible once you become serious about purchasing a home.

If you’re nearing that point and aren’t sure how your credit score stacks up, Fannie Mae might have some insight. In a recent Fannie Mae report, it found that first-time home buyers had an average credit score of 746. And that’s pretty much in line with the average credit score across all home buyers, not just first-timers — 754.

If your credit score is somewhere in the ballpark of 746, it means you’re probably in a decent position to qualify for a mortgage. Chances are, you’ll also snag a pretty competitive mortgage rate with a score like that.

But if your score is considerably lower, you may want to take steps to raise it before applying for a home loan. Otherwise, you could get stuck with a higher mortgage rate — and more expensive home loan payments to manage.

How to raise your credit score

A higher credit score sends a message to mortgage lenders that you’re not that risky a borrower. That’s because a high score indicates you generally pay bills on time, don’t utilize too much of your available credit, and have a healthy mix of credit cards and loans.

If you feel that your credit score could use a boost before you apply for a mortgage, there are steps you can take to raise it, some of which may take longer than others to produce results.

1. Pay all bills on time

Your payment history carries more weight in calculating your credit score than any other factor. Paying bills in a timely manner should help your credit score improve, but it may take a little time to see that impact.

2. Pay off a chunk of credit card debt

If you have a pile of cash on hand and don’t need all of it for a down payment on a home, consider using some of it to whittle down your existing credit card debt. Doing so should lower your credit utilization ratio, which is another big factor in calculating your score. And if you manage to reduce that ratio substantially, you should see your credit score improve pretty quickly.

3. Correct erroneous information on your credit report

Your credit report might contain mistakes that paint an unfavorable picture of you, like delinquent debts you’ve paid off or never incurred in the first place. Getting those errors corrected could mean seeing your score improve in one to two months’ time, so it’s worth reviewing your credit report and working to address incorrect information on it.

Your credit score may be comparable to that of recent first-time home buyers. But if your score is lower, you may want to work on boosting it before applying for a mortgage. On the other hand, it may be the case that your credit score is higher than a 746. If so, you should be able to approach the mortgage application process with plenty of confidence.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase.

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