When it comes to buying a home, your credit score is one of the most important numbers in your financial life. It plays a major role in determining whether you qualify for a mortgage, what interest rate you’ll receive, and which loan programs you may be eligible for. This week on The Common Sense Mortgage, we’re diving into the basics of credit scores, how they impact your home loan, and simple steps you can take to strengthen your score before applying.

Credit scores typically range from 300 to 850, and the higher your score, the better your borrowing position. Scores are calculated using a variety of factors including payment history, amounts owed, length of credit history, types of credit, and new credit inquiries. Most conventional mortgage lenders prefer a score of at least 620, though FHA loans may allow for scores as low as 580. That said, the better your score, the more options—and better terms—you’ll have.

Lenders use your credit score as a way to measure risk. A strong score tells lenders that you’re responsible with credit and more likely to repay your mortgage on time. This can lead to lower interest rates, which directly affects how much you’ll pay over the life of your loan. For example, even a small difference in rate—say, 0.5%—can add up to thousands of dollars saved over a 30-year mortgage.

To maintain a healthy credit score, there are a few key habits to avoid. Late or missed payments can significantly damage your score, especially if they’re 30 days or more past due. Maxing out your credit cards or keeping high balances relative to your credit limit also hurts your credit utilization ratio—one of the biggest scoring factors. Additionally, avoid closing old accounts, even if you’re not using them frequently. Older accounts contribute to your credit history length, which boosts your score. And during the mortgage process, avoid taking out new loans or lines of credit, as hard inquiries and new debt can lower your score or raise red flags for lenders.

On the flip side, there are several proactive steps you can take to improve your credit. Set up payment reminders or automatic payments to ensure bills are paid on time. Pay down high-interest credit card balances first, but try to reduce all revolving debt as much as possible. If you have little or no credit history, consider a secured credit card or becoming an authorized user on a family member’s account with strong credit habits. Most importantly, be patient—credit improvement takes time, but consistent action can yield measurable results within a few months.

If your score isn’t where you want it to be, there are effective ways to improve it. Start by paying all your bills on time, as payment history makes up the largest portion of your score. Keep your credit card balances well below the limits—ideally under 30% of your available credit. Refrain from opening multiple new accounts in a short period, which can lower your average account age and trigger hard inquiries. Finally, review your credit report for any errors. You can get a free report from each bureau annually at AnnualCreditReport.com. Dispute any inaccuracies promptly to ensure your score reflects accurate information.

Quick Tip:
Even a small bump in your score—say from 660 to 680—can move you into a better pricing tier with your lender. This means a lower monthly payment and big savings over time. Investing a little effort in improving your credit can pay off in a big way when it’s time to secure your mortgage.

Common Sense Takeaway:
Your credit score isn’t just a number—it’s a tool that can open or close financial doors. By understanding how it works and taking small, consistent steps to improve it, you’re setting yourself up for mortgage success and long-term financial stability.