A first-time homebuyer can improve their credit score before applying for a mortgage by checking all three credit reports for errors and keeping credit card balances low before applying. They should also avoid opening new credit accounts before their mortgage and build a consistent record of on-time payments.
The National Association of Realtors (NAR) reports that in 2025, the share of first-time homebuyers dropped to a record low of 21%. There are many reasons for this, such as a tougher economy and perhaps more people preferring to rent rather than buy.
If you want to be a first-time homebuyer, though, you may want to get everything in order beforehand. One thing to take care of is your credit score.
What's a Good Credit Score for a First-Time Home Buyer?
In general, a good FICO score for a first-time homebuyer is 670 or higher. On the FICO scale, 670-739 is good, 740-799 is very good, and 800+ is exceptional.
Conventional mortgage lenders often look for a score of 620 or higher, but do note that requirements will vary by lender and loan program. The important thing to know is that a higher credit score can improve your borrowing terms and make it easier to qualify for lower mortgage interest rates.
Credit scores are just one part of mortgage underwriting, though. Other things lenders evaluate include your:
- Income
- Employment
- Existing debts
- Down payments
- Assets
- Overall ability to repay the loan
How Can I Improve My Credit Score Before Applying for a Mortgage?
If your credit score isn't in good shape, then it's important to take proactive steps before applying for a mortgage. Here are the things you can do so that lenders like this mortgage broker in Mancos will approve your application.
Check All Three Credit Reports for Errors
One of the fastest ways to do credit score repair is to catch and fix errors first. Key things to look for are:
- Accounts you don't recognize
- Incorrect balances
- Duplicate debts
- Outdated negative information
- Payment records that don't accurately reflect your history
You should also make sure that personal information, account statuses, and credit limits are reported correctly.
If you find any errors, you should dispute them with the appropriate credit bureau. Make sure to have supporting documentation to help the process along.
Keep Credit Card Balances Low Before Applying
A great way to strengthen your credit score is to pay attention to your credit utilization. As part of debt reduction, you should aim to pay more than the minimum amount due, as well as reduce your credit card balances before the statement closing dates. Lower reported balances can make your revolving credit profile look less dependent on borrowed funds.
In addition, avoid moving balances between your cards to create the appearance of lower debt. The overall amount you owe still matters to your finances and how lenders see them.
Keep in mind that the goal isn't to stop using credit altogether, but instead, to maintain manageable balances and make payments consistently.
Avoid Opening New Credit Accounts Before Your Mortgage
Once you're certain that you want to buy a home, you'll want to avoid opening new credit accounts unless you have to. Doing the following in a short period can change your credit profile in a negative way:
- Opening a credit card
- Financing a vehicle
- Applying for several types of credit
For example, taking on new debt can increase your monthly obligations, and this matters during mortgage underwriting. We don't mean that you should never obtain credit when preparing to buy a home, but you should definitely be more discerning in this period.
Build a Consistent Record of On-Time Payments
A strong mortgage application should have a paper trail of responsible credit management, so make every required payment by its due date. If you need help remembering, then set up automatic payments or calendar reminders for these accounts:
- Credit cards
- Personal loans
- Student loans
Always check your accounts regularly, and don't just assume that an automatic payment went through. For multiple bills, organizing them around your pay schedule can be helpful, as this makes missed deadlines less likely.
Having a solid history of on-time payments looks very good to lenders, as this proves responsibility.
Frequently Asked Questions (FAQs)
How Much Income Do You Need To Qualify for a $500,000 Mortgage?
The income you need for a $500,000 mortgage depends on:
- Interest rate
- Loan term
- Property taxes
- Homeowners insurance
- Down payment
- HOA costs
- Other debts
There are federal ability-to-repay rules, which specify that lenders have to consider and verify income or assets, debt obligations, and debt-to-income ratio or residual income. An example is if a lender has a threshold of total monthly debts equal to 43% of gross monthly income, and your mortgage-related payment plus other debts totaled $4,300 per month, then you'd need about $10,000 in gross monthly income ($120,000 annually).
How Rare Is a 900 Credit Score?
A credit score of 900 is actually not possible under the standard FICO or VantageScore models. Both systems top out at 850, so that's the highest score you can achieve under either one.
What's good to know is that FICO classifies scores of 800+ as exceptional, so there's little benefit to pursuing a score beyond 800. Focusing on an excellent score within the applicable scoring model is more useful than trying to chase the maximum score possible.
Can I Get an FHA Loan With a 500 Credit Score?
Yes, you can, as current FHA policy permits borrowers with credit scores as low as 500 to qualify for FHA-insured financing. The caveat is that you must have at least a 10% equity position or down payment. If you have a score of 580 or higher, you can generally qualify for FHA's minimum 3.5% down-payment structure.
Do note that just because you've met the credit score threshold doesn't automatically mean that the lender will approve your application. They'll still look at other underwriting factors to make the final decision.
Become a First-Time Homebuyer
Even if your credit score isn't great, you can become a first-time homebuyer, especially if you follow our tips for improving your credit score. You should keep in mind that lenders don't just judge you based on your credit score, though, so ensure that your overall financial picture is good.
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