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Credit Information for Mortgage Borrowers

Your credit score is one of the most influential numbers in the mortgage process. Understanding how it works — and how to strengthen it — puts you in a better position to secure favorable loan terms.

How Your Credit Score Is Calculated

Lenders rely on a three-digit FICO score, typically ranging from 300 to 850, to gauge how likely you are to repay a loan. Five weighted factors determine that score.

This is the single largest factor. Every on-time payment strengthens your score, while late payments, collections, and charge-offs can cause significant drops. Even one 30-day-late mark can lower your score by 60 to 100 points.

Lenders look at how much of your available credit you are actually using. A utilization ratio below 30% is good; below 10% is excellent. Maxing out cards — even if you pay the balance monthly — can temporarily lower your score.

The longer your accounts have been open, the better. This factor considers the age of your oldest account, the age of your newest account, and the average age across all accounts.

Each hard inquiry (when a lender pulls your report for a lending decision) can reduce your score by a few points. Multiple mortgage-related inquiries within a 14-to-45-day window typically count as a single inquiry, so rate-shopping is encouraged.

A healthy mix of credit types — revolving accounts like credit cards, installment loans like auto loans, and mortgage debt — signals that you can manage different kinds of financial obligations responsibly.

How Your Score Affects Mortgage Rates

11 Strategies to Build and Protect Your Credit

• Borrow only what you can realistically repay within the agreed terms — overextending is the fastest path to missed payments.
• Pay every bill on time, every time. Set up autopay for at least the minimum due on each account so nothing slips through the cracks.
• Limit hard credit inquiries. Apply for new credit only when you genuinely need it, and consolidate your mortgage rate shopping into a short window.
• Keep an emergency fund with three to six months of expenses. Financial cushion prevents reliance on credit cards during unexpected events.
• Review your credit reports from all three bureaus at least once a year. Dispute any inaccuracies you find — errors are more common than most borrowers realize.
• Maintain high credit limits but keep balances low. A $10,000 limit with a $500 balance produces a 5% utilization ratio, which is excellent.
• Think twice before opening store credit cards just for a one-time discount. The hard inquiry and reduced average account age can outweigh a 10% savings.
• Avoid opening new accounts solely to transfer balances. This creates hard inquiries and can shorten your average credit history.
• Keep old accounts open, even if you rarely use them. Closing a long-standing account removes its positive history and reduces your total available credit.
• Use your credit cards regularly for small purchases, then pay the statement balance in full each month. Consistent, responsible use builds your score over time.
• Diversify your account types gradually. A mix of a credit card, an auto loan, and a mortgage shows lenders you can handle varied obligations.

Common Credit Mistakes to Avoid Before Applying